Recent Perspectives on Trade and Inequality

Posted: 31 Aug 2011

See all articles by Ann E. Harrison

Ann E. Harrison

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

John McLaren

University of Virginia; NBER

Margaret McMillan

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

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Date Written: September 2011

Abstract

The 1990s 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, the effects of offshoring of tasks, effects on incomplete contracting, and the effects of labor-market frictions. A number of these mechanisms have received substantial empirical support.

Suggested Citation

Harrison, Ann E. and McLaren, John and McMillan, Margaret, Recent Perspectives on Trade and Inequality (September 2011). Annual Review of Economics, Vol. 3, pp. 261-289, 2011. Available at SSRN: https://ssrn.com/abstract=1920106 or http://dx.doi.org/10.1146/annurev.economics.102308.124451

Ann E. Harrison

University of California, Berkeley ( email )

Giannini Hall
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

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John McLaren

University of Virginia ( email )

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Charlottesville, VA 22904-4182
United States
434-924-3994 (Phone)
434-982-2904 (Fax)

NBER

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Margaret McMillan

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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