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Globalization and Income Distribution: A Specific Factors Continuum Approach

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  • James E. Anderson

    ()
    (Boston College)

Abstract

Does globalization widen inequality or increase income risk? Globalization amplifies the effect of idiosyncratic relative productivity shocks. But wider markets reduce the effect of economy-wide supply shocks on world prices. Both forces are at work in the specific factors continuum model of this paper. Ex post equilibrium exhibits positive (negative) premia for export (import-competing) sector specific factors. Globalization widens inequality in North and South. Globalization increases personal income risk from idiosyncratic productivity shocks, but reduces aggregate shock risk acting on the factoral terms of trade. Both forces have their greatest impact on the poorest and least impact for the richest trading sectors, while the distribution in nontraded sectors is unaffected.

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 699.

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Date of creation: 01 Dec 2008
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Handle: RePEc:boc:bocoec:699

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Keywords: globalization; income distribution; inequality; trade; productivity;

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Cited by:
  1. Harrison, Ann & McLaren, John & McMillan, Margaret S., 2010. "Recent findings on trade and inequality:," IFPRI discussion papers 1047, International Food Policy Research Institute (IFPRI).
  2. Basco, Sergi & Mestieri, Martí, 2013. "Heterogeneous trade costs and wage inequality: A model of two globalizations," Journal of International Economics, Elsevier, vol. 89(2), pages 393-406.
  3. Arnaud Costinot & Jonathan Vogel, 2009. "Matching and Inequality in the World Economy," NBER Working Papers 14672, National Bureau of Economic Research, Inc.

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