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Income Inequality in Advanced Economies: A Critical Examination of the Trade and Technology Theories and an Alternative Perspective


  • A Singh


This paper critically examines the trade and technology theories which dominate the large and growing literature on the determinants of changes in income inequality in advanced industrial countries during the 1980s and 1990s. Both theories, despite their rather different approaches to the subject are shown to have a common premise: advanced countries have experienced a fall in the relative demand for unskilled labour and an increase in that of skilled labour. This single explanation for both phenomena has been dubbed the 'transatlantic consensus'. This paper argues that this consensus, together with the associated theories based on trade with the Third World and skill biased technological progress respectively, is analytically as well as empirically unsatisfactory. It puts forward an alternative analysis which emphasises the role of institutions (e.g. unions, minimum wages), macro-economic conditions and social norms. It naturally arrives at rather different policy conclusions from those of the orthodox economists.

Suggested Citation

  • A Singh, 2001. "Income Inequality in Advanced Economies: A Critical Examination of the Trade and Technology Theories and an Alternative Perspective," Working Papers wp219, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp219
    Note: PRO-1

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    References listed on IDEAS

    1. Cooper, Richard, 2001. "Growth and Inequality: The Role of Foreign Trade and Investment," Scholarly Articles 3677049, Harvard University Department of Economics.
    2. Blanchflower, D. & Slaughter, M., 1998. "The Causes and Consequences of Changing Income Inequality: W(h)ither the Debate?," Papers 27, Centre for Economic Performance & Institute of Economics.
    3. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
    4. Anthony B. Atkinson, 2000. "The Changing Distribution of Income: Evidence and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(1), pages 3-18, February.
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    Cited by:

    1. Marika Karanassou & Hector Sala, 2012. "Inequality and Employment Sensitivities to the Falling Labour Share," The Economic and Social Review, Economic and Social Studies, vol. 43(3), pages 343-376.
    2. Singh, Ajit, 2007. "Globalization and Industrial Revolutions in India and China: Implications for Advanced and Developing Economies and for National and International Policies," MPRA Paper 24286, University Library of Munich, Germany.
    3. Joël Hellier & Nathalie Chusseau, 2010. "Globalization and the Inequality-Unemployment Tradeoff," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 1028-1043, November.

    More about this item


    Income inequality; manufactured imports from developing countries; skill biased technical progress;

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • F3 - International Economics - - International Finance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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