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Globalization and Income Distribution: A Specific Factors Continuum Approach

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  • James E. Anderson

Abstract

Does globalization widen inequality or increase income risk? In the specific factors continuum model of this paper, globalization widens inequality, amplifying the positive (negative) premia for export (import- competing) sectors. Globalization amplifies the risk from idiosyncratic relative productivity shocks but reduces risk from aggregate shocks to absolute advantage, relative endowments and transfers. Aggregate-shock-induced income risk bears most heavily on the poorest specific factors, while non-traded sectors are insulated. Heterogeneous shocks to firms induce Darwinian competition for sector specific factors that is harsher the more productive the sector. Wage bargaining implies within-sector wage dispersion that falls or rises with export intensity depending on the joint distribution of sectoral and firm shocks.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14643.

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Date of creation: Jan 2009
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Publication status: published as The Specific Factors Continuum Model, with Implications for Globalization and Income Risk James E. Anderson Revised, July 2011 Journal of International Economics, 85, 174-85.
Handle: RePEc:nbr:nberwo:14643

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  1. Besedes, Tibor & Prusa, Thomas J., 2006. "Product differentiation and duration of US import trade," Journal of International Economics, Elsevier, vol. 70(2), pages 339-358, December.
  2. James E. Anderson, 2009. "Gravity, Productivity and the Pattern of Production and Trade," NBER Working Papers 14642, National Bureau of Economic Research, Inc.
  3. Emily Blanchard & Gerald Willmann, 2013. "Trade, Education, and the Shrinking Middle Class," CESifo Working Paper Series 4141, CESifo Group Munich.
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  10. Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September.
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Cited by:
  1. Céline CARRERE & Marco FUGAZZA & Marcelo OLARREAGA & Frédéric ROBERT-NICOUD, 2014. "Trade in Unemployment," Working Papers P101, FERDI.
  2. Jonathan Vogel & Arnaud Costinot, 2008. "Matching and Inequality in the World Economy," 2008 Meeting Papers 879, Society for Economic Dynamics.
  3. 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.
  4. Ann Harrison & John McLaren & Margaret McMillan, 2011. "Recent Perspectives on Trade and Inequality," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 261-289, 09.
  5. Harrison, Ann & McLaren, John & McMillan, Margaret S., 2010. "Recent findings on trade and inequality:," IFPRI discussion papers 1047, International Food Policy Research Institute (IFPRI).
  6. James E. Anderson, 2009. "Gravity, Productivity and the Pattern of Production and Trade," NBER Working Papers 14642, National Bureau of Economic Research, Inc.

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