Recent Perspectives on Trade and Inequality

Harrison, Ann E.; McLaren, John; McMillan, Margaret

Download This Paper

Open PDF in Browser

Add Paper to My Library

Recent Perspectives on Trade and Inequality

World Bank Policy Research Working Paper No. 5754

54 Pages Posted: 20 Apr 2016

See all articles by Ann E. Harrison

Ann E. Harrison

University of California, Berkeley; National Bureau of Economic Research (NBER)

Margaret McMillan

Tufts University - Department of Economics; International Food Policy Research Institute (IFPRI); National Bureau of Economic Research (NBER)

There are 2 versions of this paper

Date Written: August 1, 2011

Abstract

The 1990's dealt a blow to traditional Heckscher-Ohlin analysis of the relationship between trade and income inequality, as it became clear that rising inequality in low-income countries and other features of the data were inconsistent with that model. As a result, economists moved away from trade as a plausible explanation for rising income inequality. In recent years, however, a number of new mechanisms have been explored through which trade can affect(and usually increase) income inequality. These include within-industry effects due to heterogeneous?firms; effects of offshoring of tasks; effects on incomplete contracting; and effects of labor-market frictions. A number these mechanisms have received substantial empirical support.

Keywords: Labor Markets, Economic Theory & Research, Labor Policies, Trade Policy, Emerging Markets

Suggested Citation: Suggested Citation

Harrison, Ann E. and McLaren, John and McMillan, Margaret, Recent Perspectives on Trade and Inequality (August 1, 2011). World Bank Policy Research Working Paper No. 5754, Available at SSRN: https://ssrn.com/abstract=1907072