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Distributional Consequences of Globalization

Distributional Consequences of Globalization. Ron Rogowski UCLA. Broader View of “Globalization” and “Consequences”. Trade in Products Factors of production (migration, investment) Effects on (at least) World Nations Factors Sectors. Four (or five?) IPE Models. Heckscher-Ohlin

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Distributional Consequences of Globalization

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  1. Distributional Consequences of Globalization Ron Rogowski UCLA

  2. Broader View of “Globalization” and “Consequences” • Trade in • Products • Factors of production (migration, investment) • Effects on (at least) • World • Nations • Factors • Sectors

  3. Four (or five?) IPE Models • Heckscher-Ohlin • Specific-factors • Samuelson-Jones • Ricardo-Viner • Neo-Ricardian (Davis-Weinstein) • Economies of Scale • Firm (Boeing v. Airbus) • Locational or network

  4. World and Country Effects (Important for Redistribution) • World welfare improved by trade, migration in almost all models (EoS partial exception) • Country welfare • Improved by trade in products in almost all cases (EoS exceptions) • May be diminished by migration (H-O, S-J, neo-Ricardian)

  5. Within-country Effects: Heckscher-Ohlin • Trade (in products) • Benefits abundant factors • Harms scarce factors • Former outweighs latter (redistribution feasible) • Migration (of factors) • Same benefits, harms • Harm may outweigh gain in advanced economies (redistribution not feasible)

  6. Within-country Effects:S-J Specific Factors • Trade (in products) • Has predictable effects on specific factors (by relative abundance) • Has ambiguous effects on the mobile factor • Migration (of factors) • Presumably benefits abundant, harms scarce factors, regardless of specificity • Hence mobile factor’s preferences on trade may differ from those on migration

  7. Within-country Effects:R-V Specific Factors • Trade (in products) • Benefits exporting sectors, harms import-competing ones: sectoral effects • Migration (of factors) • Presumably divides sectors along factoral lines: e.g., import-competing capitalists want immigration, import-competing workers oppose it (?)

  8. Within-country Effects:Neo-Ricardian • Trade (in products) • Benefits all groups in all countries • Migration (esp. of labor) • Benefits all groups in poor (sending) countries • Harms all groups in rich (receiving) countries • Former outweighs latter; world is better off • Assumes mobile factors; what if factors are specific?

  9. Within-country Effects:Locational EoS • Trade (in products) • Benefits (usually richer) country with locational EoS (Krugman,Geography and Trade) • May harm (usually poorer) country (European periphery, Canada ??) • Harm may theoretically outweigh benefit, leaving world worse off

  10. Within-country Effects:Locational EoS • Migration (of factors) • Complements, rather than substitutes for, trade in products • Usually harms sending area, benefits receiving one, by diminishing / expanding scale

  11. Focus 1: Theoretical Anomalies, esp. for H-O • Why capital doesn’t migrate more to poor countries (Lucas) • Why skilled labor does migrate to rich ones (Davis) • Why free-trade coalitions form more easily than free-migration ones (contrast to 19th Century: cf. Williamson) • Why preferences on migration differ from those on trade

  12. Focus 2: Possible Crucial Tests • Do kinds of trade matter? • Factor-endowments (H-O or S-J) • Technological superiority (neo-Ricardian) • EoS (Hollywood, Microsoft, Boeing) • Does specificity of factors matter? • Do preferences on trade differ from those on migration in theoretically predictable ways?

  13. Focus 2: Possible Crucial Tests • Do compensation mechanisms, related institutional aspects, affect • Acceptance of trade, migration? • Specificity of factors, esp. human capital (Estevez-Abe et al.) • Does pace of opening (or of change in compensation mechanisms) affect preferences?

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