Globalization and Income Distribution: A Specific Factors Continuum Approach

38 Pages Posted: 15 Jan 2009 Last revised: 7 Jul 2022

See all articles by James E. Anderson

James E. Anderson

Boston College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 2009

Abstract

Does globalization widen inequality or increase income risk? In the specific factors continuum model of this paper, globalization widens inequality, amplifying the positive (negative) premia for export (import- competing) sectors. Globalization amplifies the risk from idiosyncratic relative productivity shocks but reduces risk from aggregate shocks to absolute advantage, relative endowments and transfers. Aggregate-shock-induced income risk bears most heavily on the poorest specific factors, while non-traded sectors are insulated. Heterogeneous shocks to firms induce Darwinian competition for sector specific factors that is harsher the more productive the sector. Wage bargaining implies within-sector wage dispersion that falls or rises with export intensity depending on the joint distribution of sectoral and firm shocks.

Suggested Citation

Anderson, James E., Globalization and Income Distribution: A Specific Factors Continuum Approach (January 2009). NBER Working Paper No. w14643, Available at SSRN: https://ssrn.com/abstract=1327265

James E. Anderson (Contact Author)

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-3691 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States