NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Recent Findings on Trade and Inequality

Ann Harrison, John McLaren, Margaret S. McMillan

NBER Working Paper No. 16425
Issued in September 2010
NBER Program(s):   ITI

The 1990's dealt a blow to traditional Heckscher-Ohlin analysis of the relationship between trade and income inequality, as it became clear that rising inequality in low- income countries and other features of the data were inconsistent with that model. As a result, economists moved away from trade as a plausible explanation for rising income inequality. In recent years, however, a number of new mechanisms have been explored through which trade can affect (and usually increase) income inequality. These include within-industry effects due to heterogeneous firms; effects of offshoring of tasks; effects on incomplete contracting; and effects of labor-market frictions. A number of these mechanisms have received substantial empirical support.

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Document Object Identifier (DOI): 10.3386/w16425

Published: “Recent Perspectives on Trade and Inequality”, Ann Harrison, John McLaren and Margaret McMillan, Annual Review of Economics, Volume 3: 261-289, 2011.

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