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Globalization, Returns to Accumulationa and the World Distribution of Output

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  • Paul Beaudry
  • Fabrice Collard

Abstract

This paper examines the extent to which the process of globalization can explain the observed widening in the cross--country distribution of output--per--worker. In particular examine whether the opening up of trade in a Hecksher--Ohlin type model of trade can explain the observed changes. On the theoretical front the model highlights that, when the labor market is subject to a holdup problem, then the opening up of trade can cause an increase in the dispersion of income across countries similar to that observed in the data due to the emergence of a discrepancy between the private and social returns to capital accumulation that favors capital abundant countries. On the empirical front, we document the relevance of the model by examining whether growth patterns, decomposition exercises and specialization patterns support the model's predictions. Overall we find that over 50% of the recently observed increase in income dispersion across countries can be accounted for by the mechanism exemplified by the model.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10565.

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Date of creation: Jun 2004
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Publication status: published as Beaudry, Paul & Collard, Fabrice, 2006. "Globalization, returns to accumulation and the world distribution of output," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 879-909, July.
Handle: RePEc:nbr:nberwo:10565

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Cited by:
  1. Keyu Jin, 2012. "Industrial Structure and Capital Flows," American Economic Review, American Economic Association, American Economic Association, vol. 102(5), pages 2111-46, August.
  2. Beaudry, Paul, 2006. "Mondialisation et disparité de revenus," L'Actualité Economique, Société Canadienne de Science Economique, Société Canadienne de Science Economique, vol. 82(4), pages 477-504, décembre.
  3. Mollick, André Varella & Cabral, René & Carneiro, Francisco G., 2011. "Does inflation targeting matter for output growth? Evidence from industrial and emerging economies," Journal of Policy Modeling, Elsevier, Elsevier, vol. 33(4), pages 537-551, July.
  4. Paul Beaudry & David A. Green & Benjamin Sand, 2007. "Spill-Overs from Good Jobs," NBER Working Papers 13006, National Bureau of Economic Research, Inc.
  5. Almer, Christian & Laurent-Lucchetti, Jérémy & oechslin, Manuel, 2011. "Income shocks and social unrest: theory and evidence," MPRA Paper 34426, University Library of Munich, Germany.

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