Globalization, trade imbalances and inequality

Rafael Dix-Carneiro, Sharon Traiberman

    Research output: Contribution to journalArticlepeer-review


    What is the role of trade imbalances for the distributional consequences of globalization? We answer this question through the lens of a quantitative, general equilibrium, multi-country, multi-sector model of trade with four key ingredients: (a) workers with different levels of skills are organized into separate representative households; (b) endogenous trade imbalances arise from households’ consumption and saving decisions; (c) production exhibits capital-skill complementarity; and (d) labor markets feature both sectoral mobility frictions and non-employment. We conduct a series of counterfactual experiments that illustrate the quantitative importance of both trade imbalances and capital-skill complementarity for the dynamics of the skill premium. We show that modeling trade imbalances can lead to stark differences between short- and long-run consequences of globalization shocks for the skill premium.

    Original languageEnglish (US)
    Pages (from-to)48-72
    Number of pages25
    JournalJournal of Monetary Economics
    StatePublished - Jan 2023


    • Globalization
    • Inequality
    • Skill premium
    • Trade imbalances

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics


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