Trade and Wages, Reconsidered
Open accessAbstract
Standard economic analysis predicts that increased U.S. trade with unskilled labor–abundant countries should reduce the relative wages of U.S. unskilled labor, but empirical studies in the 1990s found only a modest effect. Has the situation changed in this decade, given the surge in imports from very low wage countries? In fact, most of this increase has been in skill-intensive goods such as computers, so that one would expect little additional impact on U.S. relative wages. However, developing countries appear to be specializing in unskilled labor–intensive niches within these industries. If so, the effect on wage inequality could still be significant. The paper develops a model and a numerical example showing that when developing countries can take over the unskilled labor–intensive portions of vertically specialized industries, the consequences can closely resemble the textbook effect. But determining the actual impact will require more finely disaggregated factor content data than are currently available.
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Trade integration has been a nonnegligible contributor to increased income inequality in the U.S., in many other industrialized, and even in developing countries.
“it is by now a widely accepted view that trade integration has been a nonnegligible contributor to increased income inequality in the U.S., in many other industrialized, and even in developing countries (see Krugman, 2008, Goldberg and Pavcnik, 2007).”
From De-Globalisation? Global Value Chains in the Post-COVID-19 Age (2020) · cites this paper as Krugman, 2008
In “Implications of the Analysis,” Krugman says increased manufactured imports from developing countries were “probably” a force for greater inequality in the United States and other developed countries. That supports the claim’s direction for developed countries, but with more uncertainty than the citing sentence conveys. The passage does not extend the conclusion to inequality within developing countries. (LLM, conf=0.86)
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Cites
Stolper, W. F., & Samuelson, P. A. (1941) · The Review of Economic Studies · doi:10.2307/2967638 · Cited by 2,430 · see citing works
The polarization of the U.S. labor market
Autor, D. H., Katz, L. F., & Kearney, M. S. (2006) · American Economic Review · doi:10.1257/000282806777212620 · Cited by 1,594 · see citing works
Distributional Effects of Globalization in Developing Countries
Goldberg, P. K., & Pavcnik, N. (2007) · Journal of Economic Literature · doi:10.1257/jel.45.1.39 · Cited by 539 · see citing works
Flagged first, then by citations
Research works printed but not linked: 19
- Hummels, David, Jun Ishii, and Kei-Mu Yi. 2001. "The Nature and Growth of Vertical Specialization in World Trade." Journal of International Economics 54: 75-96.
- Krugman, Paul R. 1980. "Scale Economies, Product Differentiation, and the Pat- tern of Trade." American Economic Review 70, no. 5: 950-59.
- ---. 2000. "Technology, Trade, and Factor Prices." Journal of International Economics 50, no. 1: 51-71.
- Leamer, Edward. 1994. "Trade, Wages, and Revolving Door Ideas." Working Paper 4716. Cambridge, Mass.: National Bureau of Economic Research.
- Mishel, Lawrence, Jared Bernstein, and Sylvia Allegretto. 2006. The State of Working America 2006/2007. Cornell University Press and Economic Policy Institute.
- Romalis, John. 2004. "Factor Proportions and the Structure of Commodity Trade." American Economic Review 94, no. 1: 67-97.
- ---. 2001. "One Size Fits All? Heckscher-Ohlin Specialization in International Production." Working Paper 8244. Cambridge, Mass.: National Bureau of Eco- nomic Research.
- ---. 2006. "The Relative Sophistication of Chinese Exports." Working Paper 12173. Cambridge, Mass.: National Bureau of Economic Research.
- Such studies include Robert Z. Lawrence, Blue-Collar Blues: Is Trade to Blame for Rising US Income Inequality? (Washington: Peterson Institute for International Economics, 2008), and Lawrence Mishel, Jared Bernstein, and Sylvia Allegretto, The State of Working America: 2006/2007 (Cornell University Press and Economics Policy Institute, 2006).
- Robert Koopman, Zhi Wang, and Shang-Jin Wei, "How Much of Chinese Exports Is Really Made in China? Assessing Domestic Value-Added When Processing Trade Is Perva- sive," Working Paper 14109 (Cambridge, Mass.: National Bureau of Economic Research, June 2008).
- George J. Borjas, Richard B. Freeman, and Lawrence F. Katz, "How Much Do Immi- gration and Trade Affect Labor Market Outcomes?" BPEA, no. 1 (1997): 1-90;
- David H. Autor, Lawrence F. Katz, and Melissa S. Kearney, "Trends in U.S. Wage Inequality: Revising the Revisionists," Review of Economics and Statistics 90 (May 2008): 300-23.
- Claudia Goldin and Lawrence F. Katz, "Long-Run Changes in the Wage Structure: Narrowing, Widening, Polarizing," BPEA, no. 2 (2007), 135-65;
- Goldin and Katz, The Race between Education and Technology (Harvard University Press, 2008).
- Robert Z. Lawrence and Matthew Slaughter, "International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup?" BPEA: Microeconomics, no. 2 (1993): 161-226;
- David H. Autor, Lawrence F. Katz, and Alan B. Krueger, "Computing Inequality: Have Computers Changed the Labor Market?" Quarterly Journal of Economics 113 (November 1998): 1169-1213.
- George J. Borjas and Valerie A. Ramey, "Foreign Competition, Market Power, and Wage Inequality," Quarterly Journal of Economics 110 (November 1995): 1075-1110.
- See Lawrence Mishel, Jared Bernstein, and Sylvia Allegretto, The State of Working America 2006/2007 (Cornell University Press and Economic Policy Institute, 2007), p. 145. The data used for their figure 3M are available at www.epi.org/content.cfm/datazone_ dznational.
- See Lawrence, Blue-Collar Blues, pp. 29 and 30.
Cited by
Sorted by citations
De-Globalisation? Global Value Chains in the Post-COVID-19 Age
Antràs, P. (2020) · doi:10.3386/w28115 · Cited by 376 · see citing works
Globalization, inequality and welfare
Antràs, P., de Gortari, A., & Itskhoki, O. (2017) · Journal of International Economics · doi:10.1016/j.jinteco.2017.07.009 · Cited by 181 · see citing works
- Authors
- Krugman, P. R.
- Venue
- Brookings Papers on Economic Activity
- Publisher
- Project MUSE
- Published
- 2008-03
- Volume
- 2008
- Issue
- 1
- Pages
- 103-154
- ISSN
- 0007-2303 (ISSN-L)
- 1533-4465
- OpenAlex
- W1968881902
- Cited by
- 466
- References
- 3
- Citations by year
- 2026: 5 · 2025: 6 · 2024: 7 · 2023: 9 · 2022: 8 · 2021: 18 · 2020: 47 · 2019: 39 · 2018: 24 · 2017: 29 · 2016: 29 · 2015: 25 · 2014: 33 · 2013: 31 · 2012: 37
- FWCI
- 77.77
- Type
- journal article
- Language
- en
- Open access
- bronze
- doi.org
- Locations
- Brookings Papers on Economic Activity (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Project Muse (Johns Hopkins University) (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Historical Economic and Social Studies
- Keywords
- trade and wages, relative wages, unskilled labor, wage inequality, vertical specialization, developing countries, factor content of trade, trade liberalization, labor market effects of trade
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