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Monday, January 07, 2008

Trade and Wages

Dani Rodrik sets the record straight on the existence of empirical evidence showing that international trade contributes to inequality:

Trade and wages, by Dani Rodrik: I have often read or heard the assertion that there is no respectable work by economists that attributes an important part of rising inequality in the U.S. to international trade, with the implication being that it's all (or mostly) due to skill-biased technological change. Greg Mankiw has made this argument in the past, and Alan Blinder implies as much in his recent NYT article.

I have never understood why the work of Rob Feenstra and Gordon Hanson is overlooked in this context. These two are among the very best empirical trade economists today... In a series of papers [e.g.], they have argued that outsourcing and global production sharing act just like skill-biased technological change, and they have played an important role in shaping wage inequality. Their empirical work is careful and driven by a compelling theoretical model of within-industry specialization. ... Importantly, their framework helps explain how globalization contributes to inequality in both developed and developing countries.

    Posted by on Monday, January 7, 2008 at 12:21 AM in Economics, Income Distribution, International Trade | Permalink  TrackBack (0)  Comments (10)

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