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International Economics Seminars

Exports, Imports, and Earnings Inequality: Micro-Data and Macro-Lessons From Ecuador

Dave Donaldson (MIT), joint with Rodrigo Adao, Paul Carrillo, Arnaud Costinot and Dina Pomeranz

Wednesday 11 November 2020 12:30 - 14:00


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About this event

The earnings of individuals depend on the demand for the factor services they supply. International trade may therefore affect earnings inequality because either: (i) foreign relative factor demand is different from domestic relative factor demand, an export channel; or (ii) the availability of foreign factor services shifts domestic relative factor demand, an import channel. We use novel microdata from Ecuador that allows us to measure individual-level exposure to these two channels, for both capital and labor income, as well as to estimate their incidence across the income distribution. We find that international trade raises earnings inequality in Ecuador, mostly through the import channel and especially in the upper-half of the income distribution.