DP17694 Pros and Cons of Globalization: Income-Based Attitudes
Which income group is pro‐globalization or anti‐globalization—the wealthy skilled‐labor or the poor low‐skilled labor? How globalization affect income‐based attitudes towards globalization? The paper addresses these issues in the framework of a small open economy which trades in goods and financial securities with the rest of the world. Income‐based political cleavages analyzed
are grounded on trade‐related and macro‐related fundamentals, familiar from a standard open‐economy model. They are: (i) The degree of trade border frictions, (ii) The degree of international finance frictions, (iii) The relative factor abundance that determines the capital intensity of the country’s exports; And, (iv) The domestic savings and productivity of domestic investment, which determines whether the country is a financial capital exporter or importer.