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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.

Suggested Citation

  • James E. Anderson, 2009. "Globalization and Income Distribution: A Specific Factors Continuum Approach," NBER Working Papers 14643, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14643
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    Cited by:

    1. Carrère, Céline & Fugazza, Marco & Olarreaga, Marcelo & Robert-Nicoud, Frédéric, 2014. "Trade in Unemployment," CEPR Discussion Papers 9916, C.E.P.R. Discussion Papers.
    2. Carrère, Céline & Fugazza, Marco & Olarreaga, Marcelo & Robert-Nicoud, Frédéric, 2016. "On the heterogeneous effect of trade on unemployment," CEPR Discussion Papers 11540, C.E.P.R. Discussion Papers.
    3. Arnaud Costinot & Jonathan Vogel, 2010. "Matching and Inequality in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 747-786, August.
    4. 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.
    5. 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, September.
    6. James E. Anderson, 2008. "Gravity, Productivity and the Pattern of Production and Trade," Boston College Working Papers in Economics 700, Boston College Department of Economics.
    7. Harrison, Ann & McLaren, John & McMillan, Margaret S., 2010. "Recent findings on trade and inequality:," IFPRI discussion papers 1047, International Food Policy Research Institute (IFPRI).

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    JEL classification:

    • F10 - International Economics - - Trade - - - General

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