Distributional Consequences of Globalization

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					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 • Specific-factors
– Samuelson-Jones – Ricardo-Viner

• Neo-Ricardian (Davis-Weinstein) • Economies of Scale
– Firm (Boeing v. Airbus) – Locational or network

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)

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)

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

Within-country Effects: R-V Specific Factors
• Trade (in products)
– Benefits exporting sectors, harms importcompeting ones: sectoral effects

• Migration (of factors)
– Presumably divides sectors along factoral lines: e.g., import-competing capitalists want immigration, import-competing workers oppose it (?)

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?

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

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

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

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?

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?