Jump Main Menu. Go directly to the main content

Sección de idiomas


Fin de la sección de idiomas

Access / Registration

Sección de utilidades

Fin de la sección de utilidades

Secondary menu End of secondary menu

Research projects

Start of main content

The effects of trade imbalances on salary inequality

12nd National Competition for Economic Research Grants

International economics

Senior Researcher : Rosario Crinò

Research Centre or Institution : Centro de Estudios Monetarios y Financieros (CEMFI)


The last two decades have seen an unprecedented increase in trade imbalances: many industrialised countries have incurred growing trade deficits with the developing world. The recent financial crisis has highlighted this phenomenon, whose implications require better understanding. However, this task is difficult because the existing international trade models are usually based on a supposition of "balanced trade" and therefore they are not adequate for the study of the consequences of trade imbalances between countries.

This project seeks to advance in the analysis of trade imbalances, providing an exhaustive evaluation of their effects on a fundamental aspect of the well-being of countries: salary inequality. In recent decades, salary inequality has increased considerably throughout the world, and the difference in salaries between highly-qualified and unqualified workers has risen considerably in both developed and developing countries. These patterns do not conform to the Traditional Theory of International Trade (Heckscher-Ohlin model), according to which international trade should lead to an increase in salary inequality in countries with abundant qualified work and a decrease in countries where this factor is scarce.

The first aim of this project is to extend the Traditional Theory of International Trade to permit trade imbalances and to show how, in that configuration, international trade can increase salary inequality throughout the world, thus providing a possible solution to one of the most important enigmas for the Traditional Theory of International Trade. The second aim of the project is to empirically test the new mechanism of the model and evaluate its quantitative relevance compared to other possible explanations of salary inequality suggested in the literature, such as offshoring, direct foreign investment, technical progress and the growth in productivity.

The results of the project will produce new knowledge for the evaluation of exchange-rate policies aimed at increasing the trade surpluses of a country by keeping the currency undervalued. Likewise, these results will produce new knowledge for the evaluation of the role of the World Trade Organisation in the development of adequate interventions to rebalance the world economy in the future.

  • Activities related
  • Projects related
  • News related
  • Publications related
  • Thesis related

see all

see all

End of main content