A Possibly Interesting Analysis of U.S. Income Distribution

[adios]

Per Lehighguy's request.

I'm almost certain that I'm at least in the ballpark about income distribution and who's doing better and who's doing worse and why. This analysis is a little dated but basically uses the numbers that we're using in our discussion. It's technical and I haven't totally scrutinized it but I will.

Trade and Income Distribution: The Debate and New Evidence (http://www.iie.com/publications/pb/pb.cfm?researchid=94)

From the analysis:

What the findings do imply, however, is that the market process alone does not necessarily assure that the gains from trade are evenly distributed. This suggests in turn that a wide array of other equity-oriented policies should appropriately accompany a free-market (and free-trade) strategy. More narrowly, the results also suggest the potential importance of training and education in assuring that rising relative demand for skilled workers translates into broad advances for all workers rather than leaving behind a large cadre of unskilled.

[sam h]

That is a good article Adios. One thing I think it shows is that these are the types of "macrocausal" questions to which there are no clear answers. You have a lot of very smart people positing different theories and refuting each other. Probably both trade and technological change are partly responsible, but really pinning down the relative weight of each is very, very difficult.

[ QUOTE ]
Many other factors than trade, however, have played a role in trends for skilled and unskilled wages, notably including rapid technological change, deunionization, and an eroding real minimum wage.

[/ QUOTE ]

It would have been nice if the article had gone into these other confounding variables a bit. Ultimately, the debate among economists has centered on the relative importance of trade and technological change. But there is another camp that believes that you also have to look at distributional politics and the political struggles over the ways that markets are regulated.

Basic economics causal model:

Trade/Technological change --> Demand curve shift --> Changing returns to various parts of labor force

Basic political economy causal model:

Trade/technological change --> Demand curve shift + Political pressures, expressed in ways dependent upon political institutions/alliances --> Changes to ways that markets are regulated --> Changing returns to various parts of labor force