Globalization and Income Inequality: The Distributional Effects of Import Competition | Clausen Center

Globalization and Income Inequality: The Distributional Effects of Import Competition

by Christopher J. Palmer (Bekeley-Haas)

This project seeks to ascertain the extent to which ongoing globalization (in the form of international trade) has affected local labor markets. The link between international trade and income inequality has become the subject of political debate recently as national political leaders have considered the Trans-Pacific Partnership trade treaty. Recent academic work by Autor, Dorn, and Hanson (2013) found that local labor markets that were more exposed to Chinese import competition had lower employment and lower average wages. Acemoglu, Autor, Dorn and Hanson (2014) likewise found that import competition from China was a major force in suppressing overall U.S. job growth in the 2000s, particularly in the manufacturing sector. This project contributes to this literature by studying the effect of increased import competition on the distribution of local wages (rather than on the average local wages). A priori, it is quite plausible that the incidence of import competition will be quite different across the wage distribution. Understanding who bears the costs and who reaps the benefits of free trade informs trade policy, tax and transfer policy, and our understanding of income inequality.

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