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Globalisation, Productive Systems, and Inequalities

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  • Gilles Duranton

Abstract

Using the idea that the division of labor is limited not only by the extent of the market but also by its heterogeneity, it is proposed in this paper that 'globalisation' is redrawing the lines of division within and between countries. Our model builds on the concept of productive systems. Our results indicate that progressive trade integration among 'similar' countries lead first to disparities between countries and then to convergence between nations but also to inequalities within nations (thus possibly accounting for the deterioration of the labor market situation of the unskilled). It is also shown that trade integration among rich economies and/or rising skills therein can lead to the marginalisation of poorer countries (thus possibly accounting for the convergence of countries in the world economy towards a twin-peaked distribution and the delinking of some countries from the world trading system).

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0401.

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Date of creation: Sep 1998
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Handle: RePEc:cep:cepdps:dp0401

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1015, C.E.P.R. Discussion Papers.
  2. Murphy, Kevin M. & Shleifer, Andrei, 1997. "Quality and trade," Journal of Development Economics, Elsevier, Elsevier, vol. 53(1), pages 1-15, June.
  3. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 9(3), pages 57-80, Summer.
  4. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  5. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 551-75, August.
  6. Puga, Diego, 1997. "The Rise and Fall of Regional Inequalities," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1575, C.E.P.R. Discussion Papers.
  7. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, American Economic Association, vol. 77(5), pages 810-22, December.
  8. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 389-405, June.
  9. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 653-79, August.
  10. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  11. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
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Cited by:
  1. Cigno, Alessandro & Rosati, Furio C. & Guarcello, Lorenzo, 2002. "Does Globalization Increase Child Labor?," World Development, Elsevier, Elsevier, vol. 30(9), pages 1579-1589, September.

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