Discussion paper

DP11701 Globalization and Wage Inequality

Globalization has been blamed for rising inequality in rich and poor countries. Yet the views of
many protagonists in this debate are not based on evidence. To help form an evidence-based
opinion, I review in this paper the theoretical and empirical literature on the relationship between
globalization and wage inequality. While the initial analysis that started in the early 1990s
focused on a particular mechanism that links trade to wages, subsequent studies have considered
several other channels, and the quantitative assessment of the size of these influences has been
carried out in multiple studies. Building on this research, I conclude that trade played an
appreciable role in increasing wage inequality, but that its cumulative effect has been modest,
and that globalization does not explain the preponderance of the rise in wage inequality within


Helpman, E (2016), ‘DP11701 Globalization and Wage Inequality‘, CEPR Discussion Paper No. 11701. CEPR Press, Paris & London. https://cepr.org/publications/dp11701