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Is Trade Liberalization an Important Cause of Increasing U.S. Wage Inequality? The Interaction of Theory and Policy


  • John Davis


The majority of mainstream economists believe that globalization and trade liberalization have had a minor role in increasing U.S. wage inequality. A minority argues that capital mobility and outsourcing indicate a larger effect. This paper first surveys these views, and then argues that how we understand the policy consequences of trade liberalization helps determine the character of our analysis of the issue itself. Thus, a shift in policy perspective, to consider the "equity costs" of trade liberalization in terms of eroded U.S. labor market institutions, produces a larger framework for analyzing the consequences of globalization and trade liberalization than is available in traditional comparative advantage efficiency reasoning. From this wider perspective, trade liberalization has likely had a greater impact on U.S. wage inequality than even the minority mainstream position allows.

Suggested Citation

  • John Davis, 1999. "Is Trade Liberalization an Important Cause of Increasing U.S. Wage Inequality? The Interaction of Theory and Policy," Review of Social Economy, Taylor & Francis Journals, vol. 57(4), pages 488-506.
  • Handle: RePEc:taf:rsocec:v:57:y:1999:i:4:p:488-506
    DOI: 10.1080/00346769900000018

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    Cited by:

    1. Farrokh Nourzad, 2005. "Macroeconomic and Sectoral Effects of International Trade: A Vector Error-Correction Study," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(1), pages 43-54, March.


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