Hostname: page-component-848d4c4894-4hhp2 Total loading time: 0 Render date: 2024-05-19T22:19:27.942Z Has data issue: false hasContentIssue false

Winners and Losers in the Global Economy

Published online by Cambridge University Press:  09 July 2003

Get access


During the 1980s, economists began to observe a trend of rising income inequality in the advanced industrial economies. At the same time, the data revealed that these economies were becoming increasingly exposed to imports of manufactured goods from developing countries. The question that follows is whether these outcomes are causally related, as economic theory suggests is possible.

The literature under review represents the current thinking on that question. These studies, all by mainstream economists, accept that free trade makes for good policy, since it results in efficiency gains that are enjoyed by consumers. But these scholars also recognize that free trade can alter the returns to the factors of production, creating new patterns of winners and losers.

Although this body of literature provides an impressive display of technical skills and formal economic reasoning, and on the whole gives convincing evidence that trade is only one culprit among many in explaining the problems facing blue-collar workers, it still sheds relatively little light on the political economy of the outcome. That is, it tells us little about the role that political, economic, and labor market institutions might play in shaping factor returns. This deeper understanding requires that we take a fresh look at existing institutions and the material interests and ideas underpinning them. Only then will we discover why societies have allowed a certain group of citizens—mainly the least skilled and least educated—to fall by the economic wayside.

Review Essay
Copyright © The IO Foundation 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


Acocella, Nicola. 1998. The Foundations of Economic Policy: Values and Techniques. New York: Cambridge University Press.Google Scholar
Aho, C. Michael, and Bayard, Thomas O.. 1984. Costs and Benefits of Trade Adjustment Assistance. In The Structure and Evolution of Recent U.S. Trade Policy, edited by Baldwin, Robert E. and Krueger, Anne O., 153–92. Chicago: University of Chicago Press.Google Scholar
Baldwin, Robert. 1996. The Political Economy of Trade Policy. In The Political Economy of Trade Policy, edited by Feenstra, Robert, Grossman, Gene, and Irwin, Douglas, 147–75. Cambridge, Mass.: MIT Press.Google Scholar
Bhagwati, Jagdish. 1998. External Sector and Income Distribution. In Income Distribution and High Quality Growth, edited by Tanzi, Vito and Chu, Ke-young, 251–99. Cambridge, Mass.: MIT Press.Google Scholar
Borjas, George J., Freeman, Richard B., and Katz, Lawrence F.. 1992. On the Labor Market Effects of Immigration and Trade. In Immigration and the Work Force: Economic Consequences for the United States and Source Areas: A National Bureau of Economic Research Project Report, edited by Borjas, George J. and Freeman, Richard B., 213–44. Chicago: University of Chicago Press.Google Scholar
Brecher, Richard A. 1974. Minimum Wage Rates and the Pure Theory of International Trade. Quarterly Journal of Economics 88 (February):98116.CrossRefGoogle Scholar
Brecher, Richard A., and Choudhri, Ehsan U.. 1994. Pareto Gains from Trade Reconsidered: Compensating for Jobs Lost. Journal of International Economics 36 (3–4):223–38.CrossRefGoogle Scholar
Clayton, Richard, and Pontusson, Jonas. 1998. Welfare-State Retrenchment Revisited. World Politics 51 (1):6798.CrossRefGoogle Scholar
Cline, William R. 1997. Trade and Income Distribution. Washington, D.C.: Institute for International Economics.Google Scholar
Collins, Susan M., ed. 1998. Imports, Exports, and the American Worker. Washington, D.C.: Brookings Institution.Google Scholar
Collins, Chuck, Hartman, Chris, and Sklar, Molly. 1999. Divided Decade: Economic Disparity at the Century's Turn. 15 December. Boston: United for a Fair Economy. Available online at <>..' href=,+Chuck,+Hartman,+Chris,+and+Sklar,+Molly.+1999.+Divided+Decade:+Economic+Disparity+at+the+Century's+Turn.+15+December.+Boston:+United+for+a+Fair+Economy.+Available+online+at+.>Google Scholar
Corden, W. M. 1974. Trade Policy and Economic Welfare. Oxford: Clarendon Press.Google Scholar
Council of Economic Advisers and the Executive Office of the President. 1996. Economic Report of the President. Washington, D.C.: U.S. Government Printing Office.Google Scholar
Crosby, Travis. 1977. English Farmers and the Politics of Protection, 1815–1852. Hassocks, U.K.: Harvester.Google Scholar
Davis, Donald. 1996. Trade Liberalization and Income Distribution. Discussion Paper 551 (September). Cambridge, Mass: Harvard Institute for International Development.CrossRefGoogle Scholar
Garrett, Geoffrey. 1998a. Partisan Politics in the Global Economy. New York: Cambridge University Press.CrossRefGoogle Scholar
Garrett, Geoffrey. 1998b. Global Markets and National Politics: Collision Course or Virtuous Circle? International Organization 52 (4):787824.CrossRefGoogle Scholar
Hall, Robert E. 1995. Lost Jobs. Brookings Papers on Economic Activity 1:221–73. Washington, D.C.: Brookings Institution.Google Scholar
Hausman, Daniel M., and McPherson, Michael S.. 1996. Economic Analysis and Moral Philosophy. New York: Cambridge University Press.Google Scholar
Irwin, Douglas A. 1996. Against the Tide: An Intellectual History of Free Trade. Princeton, N.J.: Princeton University Press.CrossRefGoogle Scholar
Iversen, Torben, and Wren, Anne. 1998. Equality, Employment, and Budgetary Restraint: The Trilemma of the Service Economy. World Politics 50 (4):507–46.CrossRefGoogle Scholar
Jacobson, Louis. 1998. Compensation Programs. In Imports, Exports, and the American Worker, edited by Collins, Susan M., 473537. Washington D.C.: Brookings Institution.Google Scholar
Kapstein, Ethan. 1998. Trade Liberalization and the Politics of Trade Adjustment Assistance. International Labour Review 137:501–16.Google Scholar
Kapstein, Ethan. 1999. Sharing the Wealth: Workers and the World Economy. New York: W. W. Norton.Google Scholar
Katzenstein, Peter J., ed. 1978. Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States. Madison: University of Wisconsin Press.Google Scholar
Kletzer, Lori G. 1998. International Trade and Job Displacement in U.S. Manufacturing, 1979–1991. In Imports, Exports, and the American Worker, edited by Collins, Susan M., 423–72. Washington, D.C.: Brookings Institution.Google Scholar
Kodrzycki, Yolanda K. 1996. Laid-Off Workers in a Time of Structural Change. New England Economic Review (July-August):326.Google Scholar
Krueger, Anne O. 1995. Trade Policies and Developing Nations. Washington, D.C.: Brookings Institution.Google Scholar
Krugman, Paul. 1995. Growing World Trade: Causes and Consequences. Brookings Papers on Economic Activity 1:327–77. Washington, D.C.: Brookings Institution.Google Scholar
Krugman, Paul. 1997. Workers and Economists I: First, Do No Harm. In The New Shape of World Politics: Contending Paradigms in International Relations, ix, 286. New York: Foreign Affairs. Distributed by W. W Norton.Google Scholar
Lawrence, Robert Z., and Litan, Robert E.. 1986. Saving Free Trade: A Pragmatic Approach. Washington, D.C.: Brookings Institution.Google Scholar
Lawrence, Robert Z., and Slaughter, Matthew J.. 1993. International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup? Brookings Papers, Microeconomics, 2. Washington, D.C.: Brookings Institution.Google Scholar
Leamer, Edward E. 1998. In Search of Stolper-Samuelson Linkages. In Imports, Exports, and the American Worker, edited by Collins, Susan M., 141214. Washington, D.C.: Brookings Institution.Google Scholar
Lichbach, Mark Irving. 1989. An Evaluation of “Does Economic Inequality Breed Political Conflict?” World Politics 41 (4):431–70.CrossRefGoogle Scholar
Lynch, Lisa M. 1997. What Can We Do? Remedies For Reducing Inequality. Paper presented to Council on Foreign Relations Study Group, New York.Google Scholar
Lynch, Lisa M. 1998. Review of “Trade and Income Distribution” by Cline, William R.. Fletcher Forum—Fletcher School of Law and Diplomacy (spring): 110–15.Google Scholar
Meade, James. 1955. Trade and Welfare. London: Oxford University Press.Google Scholar
Meany, George. 1962. Statement of George Meany on the Trade Expansion Act of 1962. Hearings Before the Committee on Ways and Means. 87th Cong., 2nd sess., 13 March.Google Scholar
Mussa, Michael. 1982. Government Policy and the Adjustment Process. In Import Competition and Response, edited by Bhagwati, Jagdish N., 73122. Chicago: University of Chicago Press.Google Scholar
Nozick, Robert. 1974. Anarchy, State, and Utopia. New York: Basic Books.Google Scholar
Organization for Economic Cooperation and Development (OECD). 1994. The Job Study. Paris: OECD.Google Scholar
Organization for Economic Cooperation and Development (OECD). 1997. Trade, Earnings, and Employment: Assessing the Impact of Trade with Emerging Economies on OECD Labour Markets. Paris: Directorate for Education, Employment, Labour, and Social Affairs, OECD.Google Scholar
Phelps, Edmund S. 1997. Rewarding Work. Cambridge, Mass: Harvard University Press.CrossRefGoogle Scholar
Podgursky, Michael. 1992. The Industrial Structure of Job Displacement, 1979–1989. Monthly Labor Review 115(9):1725.Google Scholar
Rawls, John. 1971. A Theory of Justice. Cambridge, Mass.: Belknap Press.CrossRefGoogle Scholar
Remmer, Karen L. 1991. The Political Impact of Economic Crisis in Latin America in the 1980s. American Political Science Review 85 (3):777800.CrossRefGoogle Scholar
Revenga, Ana L. 1992. Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing. Quarterly Journal of Economics 107 (1):255–84.CrossRefGoogle Scholar
Robbins, Donald J. 1996. Evidence on Trade and Wages in the Developing World. Technical Papers No. 119. Paris: OECD Development Centre.Google Scholar
Rodrik, Dani. 1997. Has Globalization Gone Too Far? Washington, D.C.: Institute for International Economics.CrossRefGoogle Scholar
Samuelson, Paul A. 1948. International Trade and the Equalization of Factor Prices. Economic Journal 58:163–84.CrossRefGoogle Scholar
Slaughter, Matthew J. 1995. Multinational Corporations, Outsourcing, and American Wage Divergence. National Bureau of Economic Research Working Paper 5253. Cambridge, Mass.: NBER.Google Scholar
Stone, Charles R, and Sawhill, Isabel V.. 1987. Trade's Impact on U.S. Jobs. Challenge 30 (4):1218.CrossRefGoogle Scholar
Wood, Adrian. 1994. North-South Trade, Employment, and Inequality: Changing Fortunes in a Skill-Driven World. Oxford: Clarendon Press.Google Scholar
Bank, World. 1995. World Development Report. New York: Oxford University Press.Google Scholar
Ziera, Joseph. 1999. Wage Inequality, Technology, and Trade. Unpublished manuscript, Hebrew University of Jerusalem.Google Scholar