Trade and Inequality

Abstract

This chapter analyses the effects on inequality of two major changes in international trade: (1) the substantial increase in the weight of emerging countries, and (2) the development of offshoring and global value chains. The trade and technology interplay, the development of polarization and the emergence of superstars are also highlighted. In advanced economies, both the competition with emerging countries and offshoring increase earnings inequality, but they also tend to increase the average income. Redistribution from the winners to the losers could then make globalization beneficial for all workers.