Kapstein: Winners and Losers in the Global Economy

Kapstein, EB. 2003. Winners and Losers in the Global Economy. International Organization 54, no. 02: 359-384.

"Is globalization responsible for the growing polarity in wages now being observed in many countries around the world, creating a sharp divide between society's 'winners' and 'losers'? If so, what are the political and economic consequences of that fissure? If not globalization, what is responsible for that trend, and what, if anything, should policy makers do in response?" (359).

This article is a literature review of four texts: Cline (1997); Collins (1998); Rodrik (1997); and Wood (1994).

"The works discussed here represent the most significant recent efforts by economists to explore one aspect of the distributive problem: the effects of deepening international integration on domestic wages in the industrial countries, especially the United States" (360).

This article touches on a very wide range of topics, from the normative foundations of trade policy theory to debates between efficiency and distribution.

"The latest economic research on the relationship between trade and labor demonstrates that the great American high tide of the 1990s has failed to 'lift all boats.' Unskilled workers are struggling in the face of unemployment, job insecurity, and rising income inequality. Of all these developments, rising income inequality is of special concern to many scholars not only because of its political implications for the free trade agenda but also because of its possible economic consequences in terms of lower growth rates in the future. Does the research show, however, that free trade is a cause of labor market problems? It appears that a consensus on that question has finally emerged. Although the early literature by such scholars as Revenga suggested that increasing openness was a significant cause of job displacement and/or falling wages in import-penetrated industries, a second wave of work, led by the Lawrence-Slaughter study, cast doubt on how widespread the economic effects really were. Today, the findings of such scholars as Cline bring us to a middle ground or 'Goldilocks' view: that trade and immigration have had some effect on labor markets in the industrial countries, but they are not solely responsible for the current problems we observe" (380-1).