Trade and within-country income inequality

Until recently the economic literature had difficulties reconciling the empirical evidence of the increase in income inequality with the opening of the global economy (Wood, 1994). During the 1990s the economic literature indicated that not trade, but something else must have been driving changes in income inequality. The focus turned to skill-biased technological progress. It is only in the last decade that new trade models that allow for worker and firm heterogeneity provided mechanisms through which international trade can affect within country inequality that are consistent with empirical observation. The fact that micro level datasets became available allowed researchers to estimate and test these models providing some robust insights of the relationship between trade and within country income inequality.

Sustainable Development Goals:

Gender Equality

Decent Work and Economic Growth

Reduced Inequalities