Working Paper: NBER ID: w22944
Authors: Elhanan Helpman
Abstract: Globalization has been blamed for rising inequality in rich and poor countries. Yet the views of many protagonists in this debate are not based on evidence. To help form an evidence-based opinion, I review in this paper the theoretical and empirical literature on the relationship between globalization and wage inequality. While the initial analysis that started in the early 1990s focused on a particular mechanism that links trade to wages, subsequent studies have considered several other channels, and the quantitative assessment of the size of these influences has been carried out in multiple studies. Building on this research, I conclude that trade played an appreciable role in increasing wage inequality, but that its cumulative effect has been modest, and that globalization does not explain the preponderance of the rise in wage inequality within countries.
Keywords: No keywords provided
JEL Codes: F10; F61; F66
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade (F19) | Wage Inequality (J31) |
| Low-skill-intensive countries engaging in trade (F66) | Wages of low-skilled workers in rich countries (F66) |
| Technological Change (O33) | College Wage Premium (J31) |
| Trade + Technological Change (O33) | Wage Inequality (J31) |
| Skill-biased Technological Change (J24) | Wage Inequality (J31) |