Globalization, trade imbalances and inequality

Journal Article (Journal Article)

What is the role of trade imbalances for the distributional consequences of globalization? We answer this question through the lens of a quantitative, general equilibrium, multi-country, multi-sector model of trade with four key ingredients: (a) workers with different levels of skills are organized into separate representative households; (b) endogenous trade imbalances arise from households’ consumption and saving decisions; (c) production exhibits capital-skill complementarity; and (d) labor markets feature both sectoral mobility frictions and non-employment. We conduct a series of counterfactual experiments that illustrate the quantitative importance of both trade imbalances and capital-skill complementarity for the dynamics of the skill premium. We show that modeling trade imbalances can lead to stark differences between short- and long-run consequences of globalization shocks for the skill premium.

Full Text

Duke Authors

Cited Authors

  • Dix-Carneiro, R; Traiberman, S

Published Date

  • January 1, 2023

Published In

Volume / Issue

  • 133 /

Start / End Page

  • 48 - 72

International Standard Serial Number (ISSN)

  • 0304-3932

Digital Object Identifier (DOI)

  • 10.1016/j.jmoneco.2022.10.002

Citation Source

  • Scopus