THE IMPACT OF INTERNATIONAL TRADE ON INCOME INEQUALITY
Keywords:
Job polarisation, wage polarisation, middle-income class, globalisation, business heterogeneity.Abstract
We present a concise hypothesis that demonstrates the process by which international trade leads to the division of wages and employment into distinct groups. We are examining two countries where individuals with varying skills are employed either as knowledge workers, who create specialised products, or as production workers, who are involved in manufacturing. Under conditions of balance, enterprises that are initially equal in terms of their characteristics attract people with varying levels of expertise, resulting in differences in product quality among firms. Market integration has a more positive impact on companies who manufacture products of superior quality. The prevailing pattern of product markets where only the winners succeed intensifies competition for skilled individuals, hence worsening income disparity within nations and resulting in a division of the labour market.References
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