Globalisation and inequality or trade and wages

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Globalisation and inequality(or trade and
wages)

• Alasdair Smith
• University of Sussex
• Bari, 6 May 2003

2
Inequality in the United States

• Paul Krugman, Peddling Prosperity, 1994
• From 1979 to 1989 average family income in the
  USA rose by 11, but median family income rose by
  only 4
• 70 percent of the rise in average family income
  went to the top 1

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Stolper-Samuelson

• Foreign competition drives down the price of
  unskilled-intensive goods
• Unskilled wages fall, and more unskilled
  intensive techniques are used
• Production moves towards more skill-intensive
  products
• Lawrence and Slaughter (1993) find none of these
  effects

6
Why are modelled effects so small?

• Aggregation little difference in sectoral skill
  ratios
• Intra-industry trade
• Between-sector and within-sector effects

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References

• Paul Krugman, Peddling Prosperity (1994)
• Robert Lawrence and Matthew Slaughter, Trade and
  US Wages, Brookings Papers, 1993
• Alasdair SmithThe labour market effects of
  trade a computable general equilibrium
  approach, in Matthias Dewatripont, André Sapir
  and Khalid Sekkat, eds., Trade and Jobs in
  Europe much ado about nothing? (2000)