Globalization and Income Distribution: A Specific Factors Continuum Approach
AbstractDoes 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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Date of creation: Jan 2009
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Other versions of this item:
- James E. Anderson, 2008. "Globalization and Income Distribution: A Specific Factors Continuum Approach," Boston College Working Papers in Economics 699, Boston College Department of Economics.
- F10 - International Economics - - Trade - - - General
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- NEP-ALL-2009-01-17 (All new papers)
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