Pros and Cons of Globalization: Income-Based Attitudes

Which income group is pro-globalization or anti-globalization—the wealthy skilled-labor or the poor low-skilled labor? How globalization affect income-based attitudes towards globalization? The paper addresses these issues in the framework of a small open economy which trades in goods and financial securities with the rest of the world. Income-based political cleavages analyzed are grounded on trade-related and macro-related fundamentals, familiar from a standard open-economy model. They are: (i) The degree of trade border frictions, (ii) The degree of international finance frictions, (iii) The relative factor abundance that determines the capital intensity of the country’s exports; and, (iv) The domestic savings and productivity of domestic investment, which determines whether the country is a financial capital exporter or importer.