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Gradual globalization and inequality between and within countries

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  • Satya P. Das

Abstract

. This paper investigates the effects of gradual trade liberalization on intra‐country and inter‐country inequality. It assumes two countries, North and South, and two factors, skilled labour and unskilled labour. North is defined as the one that is relatively skilled‐labour abundant and larger. A marginal trade liberalization from autarky is shown to (a) increase (decrease) in skilled‐unskilled wage differential in the North (South) and (b) raise the inequality between North and South. As the global economy approaches free trade, a marginal trade liberalization has effects, which are the opposite of (a) and (b); that is, the relative wage falls in the North and rises in the South, and North‐South inequality decreases. Mondialisation graduelle et inégalitéà l’intérieur et entre les pays. Ce mémoire étudie les effets de la libéralisation graduelle du commerce sur les inégalités à la fois à l’intérieur des pays et entre eux. On postule l’existence de deux pays (Nord et Sud) et de deux facteurs de production (travail spécialisé et non‐spécialisé). Le Nord est le pays qui a une abondance de travail spécialisé et est plus grand. Une libéralisation du commerce à la marge à partir d’une situation d’autarcie engendre: (a) un accroissement (décroissement) du différentiel de salaires entre spécialisés et ‐non‐spécialisés dans le Nord (Sud) et (b) accroît l’inégalité entre Nord et Sud. A proportion qu’on s’approche du libre‐échange, une libéralisation marginale du commerce a les effets opposés de ceux notés en (a) et (b): le salaire relatif chute dans le Nord et s’accroît dans le Sud, et l’inégalité Nord‐Sud décroît.

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  • Satya P. Das, 2005. "Gradual globalization and inequality between and within countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(3), pages 852-869, August.
  • Handle: RePEc:wly:canjec:v:38:y:2005:i:3:p:852-869
    DOI: 10.1111/j.0008-4085.2005.00305.x
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    1. Bergh, Andreas & Nilsson, Therese, 2010. "Do liberalization and globalization increase income inequality?," European Journal of Political Economy, Elsevier, vol. 26(4), pages 488-505, December.
    2. Das, Gouranga, 2012. "Trans-border Land Acquisitions:A New Guise of Outsourcing and Host Country Effects," MPRA Paper 40651, University Library of Munich, Germany.
    3. Adolfo Cristóbal Campoamor, 2019. "Gradual trade liberalization in a North–South model of the product cycle," Journal of Economics, Springer, vol. 127(3), pages 265-292, August.
    4. Bruno Decreuse & Paul Maarek, 2015. "FDI and the Labor Share in Developing Countries : A Theory and Some Evidence," Annals of Economics and Statistics, GENES, issue 119-120, pages 289-319.
    5. Kuo‐Hsing Kuo & Shang‐Fen Wu & Cheng‐Te Lee, 2022. "The impact of environmental policy on wage inequality," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 472-485, December.
    6. Pi, Jiancai & Zhang, Pengqing, 2017. "Foreign capital, pollution control, and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 280-288.
    7. Michelle Baddeley, 2006. "Convergence or Divergence? The Impacts of Globalisation on Growth and Inequality in Less Developed Countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 391-410.
    8. Hammudeh, Shawkat & Sohag, Kazi & Husain, Shaiara & Husain, Humaira & Said, Jamaliah, 2020. "Nonlinear relationship between economic growth and nuances of globalisation with income stratification: Roles of financial development and governance," Economic Systems, Elsevier, vol. 44(3).
    9. Adolfo Cristobal Campoamor, 2019. "Trade liberalization by less developed countries with a large market size: meager welfare gains?," Economics Bulletin, AccessEcon, vol. 39(2), pages 1309-1317.
    10. Zhang, Jingjing, 2013. "Factor mobility and skilled–unskilled wage inequality in the presence of internationally traded product varieties," Economic Modelling, Elsevier, vol. 30(C), pages 579-585.
    11. Sajid Anwar, 2010. "Wage Inequality, Increased Competition, and Trade Liberalization: Short Run vs Long Run," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 574-581, August.
    12. Leslie Gray & Laureen Elgert & Antoinette WinklerPrins, 2020. "Theorizing urban agriculture: north–south convergence," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 37(3), pages 869-883, September.
    13. Anwar, Sajid & Sun, Sizhong, 2012. "Trade liberalisation, market competition and wage inequality in China's manufacturing sector," Economic Modelling, Elsevier, vol. 29(4), pages 1268-1277.
    14. Marjit, Sugata & Mandal, Biswajit, 2021. "Monopolistic Competition, Optimum Product Diversity, and International Trade - The Role of Factor Endowment and Factor Intensities," GLO Discussion Paper Series 911, Global Labor Organization (GLO).
    15. Anwar, Sajid, 2009. "Sector specific foreign investment, labour inflow, economies of scale and welfare," Economic Modelling, Elsevier, vol. 26(3), pages 626-630, May.
    16. Lau, Chi Keung & Pal, Shreya & Mahalik, Mantu Kumar & Gozgor, Giray, 2022. "Economic globalization convergence in high and low globalized developing economies: Implications for the post Covid-19 era," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 1027-1039.
    17. Anwar, Sajid, 2009. "Wage inequality, welfare and downsizing," Economics Letters, Elsevier, vol. 103(2), pages 75-77, May.
    18. repec:ebl:ecbull:v:15:y:2007:i:22:p:1-14 is not listed on IDEAS
    19. Anwar, Sajid & Rice, John, 2009. "Labour mobility and wage inequality in the presence of endogenous foreign investment," Economic Modelling, Elsevier, vol. 26(6), pages 1135-1139, November.
    20. Zhang, Jingjing, 2015. "International factor mobility, elasticity of substitution in production and the skilled–unskilled wage gap," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 122-129.
    21. Pi, Jiancai & Chen, Xuyang, 2016. "The impacts of capital market distortion on wage inequality, urban unemployment, and welfare in developing countries," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 103-115.
    22. Björn Kauder & Niklas Potrafke, 2015. "Globalization and social justice in OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(2), pages 353-376, May.
    23. Raihan, Selim, 2021. "Functional Income Distribution and Inequality in the Asia-Pacific Countries," MPRA Paper 110469, University Library of Munich, Germany.

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