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International Trade, Global Inequality and Specialization from a Political Economy Perspective

Author

Listed:
  • Clara Brenck

    (Department of Economics, New School for Social Research, USA)

  • Duncan Foley

    (Department of Economics, New School for Social Research, USA)

Abstract

In this paper we discuss possible explanations for persistent global inequalities from a political economy perspective. Different from what Smith and Marx assume in the long period method – that both capital and labor are fully mobile – we assume that labor is not mobile across regions. The lack of labor mobility is an important abstract problem to theorize about capitalist development in a globalized context. Including such assumption in the dual problem of consumption-growth and wage-profit rate, the model sheds light on some channels in which uneven development and specialization may occur: different wages and equalized profit rates can be achieved by different labor qualities or different access to technologies. If labor qualities are different, wage differences would represent only the difference in labor productivity and effective wages would be equalized, without any specialization. If technologies are different, on the other hand, specialization may occur, and trade is thus established. The lack of technological mobility can occur due to increasing returns to scale, product differentiation and different socioeconomic characteristics of countries.

Suggested Citation

  • Clara Brenck & Duncan Foley, 2023. "International Trade, Global Inequality and Specialization from a Political Economy Perspective," Working Papers 2303, New School for Social Research, Department of Economics.
    • Handle: RePEc:new:wpaper:2303
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Long period method; labor mobility; global inequality; technological differences; specialization; trade;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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