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Globalization, trade imbalances and inequality

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  • Dix-Carneiro, Rafael
  • Traiberman, Sharon

Abstract

What is the role of trade imbalances for the distributional consequences of globalization? We answer this question through the lens of a quantitative, general equilibrium, multi-country, multi-sector model of trade with four key ingredients: (a) workers with different levels of skills are organized into separate representative households; (b) endogenous trade imbalances arise from households’ consumption and saving decisions; (c) production exhibits capital-skill complementarity; and (d) labor markets feature both sectoral mobility frictions and non-employment. We conduct a series of counterfactual experiments that illustrate the quantitative importance of both trade imbalances and capital-skill complementarity for the dynamics of the skill premium. We show that modeling trade imbalances can lead to stark differences between short- and long-run consequences of globalization shocks for the skill premium.

Suggested Citation

  • Dix-Carneiro, Rafael & Traiberman, Sharon, 2023. "Globalization, trade imbalances and inequality," Journal of Monetary Economics, Elsevier, vol. 133(C), pages 48-72.
    • Handle: RePEc:eee:moneco:v:133:y:2023:i:c:p:48-72
    DOI: 10.1016/j.jmoneco.2022.10.002
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    Cited by:

    1. Dix-Carneiro, Rafael & Kovak, Brian K., 2023. "Globalization and Inequality in Latin America," IZA Discussion Papers 16363, Institute of Labor Economics (IZA).
    2. Caliendo, Lorenzo, 2023. "A comment on: Globalization, trade imbalances and inequality," Journal of Monetary Economics, Elsevier, vol. 133(C), pages 73-76.

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    More about this item

    Keywords

    Globalization; Inequality; Skill premium; Trade imbalances;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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