TY  - JOUR
AU  - Helpman,Elhanan
AU  - Itskhoki,Oleg
AU  - Redding,Stephen
TI  - Inequality and Unemployment in a Global Economy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14478
PY  - 2008
Y2  - November 2008
UR  - http://www.nber.org/papers/w14478
L1  - http://www.nber.org/papers/w14478.pdf
N1  - Author contact info:
Elhanan Helpman
Department of Economics
Harvard University
1875 Cambridge Street
Cambridge, MA 02138
Tel: 617-495-4690
Fax: 617-495-7730
E-Mail: ehelpman@harvard.edu

Oleg Itskhoki
Department of Economics
Princeton University
Fisher Hall 306
Princeton, NJ 08544-1021
Tel: 609/258-5493
Fax: 609/258-6419
E-Mail: itskhoki@princeton.edu

Stephen J. Redding
Department of Economics
and Woodrow Wilson School
Princeton University
Fisher Hall
Princeton, NJ 08544
Tel: 609/258-4016
Fax: 609/258-6419
E-Mail: reddings@princeton.edu
AB  - This paper develops a new framework for examining the distributional consequences of trade liberalization that is consistent with increasing inequality in every country, growth in residual wage inequality, rising unemployment, and reallocation within and between industries. While the opening of trade yields welfare gains, unemployment and inequality within sectors are higher in the trade equilibrium than in the closed economy. In the open economy changes in trade openness have nonmonotonic effects on unemployment and inequality within sectors. As aggregate unemployment and inequality have within- and between-sector components, changes in sector composition following the opening of trade complicate its impact on aggregate unemployment and inequality. However, when countries are nearly symmetric, the sectoral composition effects reinforce the within-sector effects, and both aggregate inequality and aggregate unemployment rise with trade liberalization.
ER  -