Globalization, trade imbalances and inequality


Dix-Carneiro, R; Traiberman, S


What is the role of trade imbalances for the distributional consequences of globalization? We answer this question through the lens of a quantitative, general equilibrium, multi-country, multi-sector model of trade with four key ingredients: (a) workers with different levels of skills are organized into separate representative households; (b) endogenous trade imbalances arise from households’ consumption and saving decisions; (c) production exhibits capital-skill complementarity; and (d) labor markets feature both sectoral mobility frictions and non-employment. We conduct a series of counterfactual experiments that illustrate the quantitative importance of both trade imbalances and capital-skill complementarity for the dynamics of the skill premium. We show that modeling trade imbalances can lead to stark differences between short- and long-run consequences of globalization shocks for the skill premium.


Dix-Carneiro, R., and S. Traiberman. “Globalization, trade imbalances and inequality.” Journal of Monetary Economics 133 (January 1, 2023): 48–72.
Cover of Journal of Monetary Economics

Publication Links