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Globalization and Income Distribution: A Specific Factors Continuum Approach

  • James E. Anderson

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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