Question

Is trade likely responsible for growing inequality across countries?

Answer 1

Greater participation in trade substantially decreases income inequality: an average rise in the trade-GDP ratio of a nation is projected to reduce its Gini inequality coefficient by 0.18%. The strong negative correlation between trade and inequality does not occur as countries with a more equitable distribution of income are involved in more trade for reasons other than business. Development provides a mechanism by which trade diminishes inequality by increasing both initial revenue and subsequent development.

The US experienced a dismal real wage output for the less skilled after 1973 and particularly in the 1980s, mostly due to declining productivity growth coupled with the wage inequality between the skills. The ratio of the top decile's weekly salaries to the bottom decile rose from 2.9 in 1963 to 4.4 in 1989. Between 1973 and 1995, the difference between wages paid to skilled workers and wages paid to unskilled workers went up by 18 percentage points. In the 1980s the same increases in inequality were visible elsewhere in the OECD

The trend of rising income disparities on the U.S. labor market and calculated that 15 percent of the relative decrease in high school dropout salaries for all other jobs in the U.S. was due to globalization factors, one third of which was due to trade. For separate research with a emphasis on the U.S. labor market, the rise in income disparities attributed to foreign trade varies from 5% to 30%. Technology, which raises the demand for skilled workers more quickly than supply, was described as the other major factor responsible for rising inequality

At times, high-income countries replaced lower import tariffs with nontariff trade barriers, most notably in textiles and apparel through the Multi-Fiber System, and relied on agricultural subsidies. Often, they were interested in fair trade deals. From the point of view of developing countries, however, many of these trade deals led to very minor adjustments in import tariffs, partially because tariffs were lowered in earlier WTO rounds and concentrated on eliminating non-tariff barriers or border controls, which are much more difficult to measure.

International trade has unfair impacts on the incomes of people living in various local labor markets. Inside countries the economic activities of other nations are similar to foreign trade. Some regions have a high concentration of industries subject to competition from imports, while others are specialized in export-oriented industries or industries which gain market access abroad.