Trade and inequality, revisited Paul Krugman The NAFTA vote, 1993 - PowerPoint PPT Presentation

Trade and inequality, revisited Paul Krugman

The NAFTA vote, 1993 Ayes Noes Democrats 102 156 Republicans 132 43

CAFTA VOTE, 2005 AYES NOES REPUBLICAN 202 27 15 187 DEMOCRATIC 1 INDEPENDENT TOTALS 217 215 The pact faces near-unanimous opposition by Democrats, who charge it fails to offer adequate labor protections. It also faces opposition or misgivings by Republicans from districts with large numbers of sugar producers, textile makers and other manufacturers - Marketwatch

College-high school wage ratio 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 7 7 7 8 8 8 8 8 9 9 9 9 9 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2

From John Romalis, AER 2004

From “Growing world trade: causes and consequences”, 1995

Imports of manufactures from NIEs 6 5 4 % of GDP 3 2 1 0 1970 1990

Bernanke, this year: Unfortunately, much of the available empirical research on the influence of trade on earnings inequality dates from the 1980s and 1990s and thus does not address later developments. Whether studies of the more-recent period will reveal effects of trade on the distribution of earnings that differ from those observed earlier is to some degree an open question. From “Growing world trade: causes and consequences”, 1995

Imports of manufactures from NIEs 6 5 4 % of GDP 3 2 1 0 1970 1990 2005

From Romalis 2004

Relative trading partner wages 80 70 60 50 % of US 40 30 20 10 0 1975 1990 2005

“Growing world trade,” again

Outsourcing made simple (really): Samuelson’s angel Apparel H Computers L

The angel’s wrath … South Factor price equalization H North L

Bundling H-intensive activities in South apparel L-intensive activities in computers H FPE North L

Share (in %), excluding capital gains 25% 30% 35% 40% 45% 50% 1917 1922 Top decile share 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002

Share (in %), excluding capital gains 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 5% 6% 7% 8% 9% 1913 1918 1923 1928 1933 1938 P90-95 1943 1948 1953 P95-99 1958 1963 1968 P99-100 1973 1978 1983 1988 1993 1998 2003