CONCLUSION

The effects of globalization on inequality have animated much theoretical, empirical, and policy literature since World War II, but particularly so in the past 30 years when, contrary to some received wisdom, greater global integration was associated with increasing inequality in developed and especially in developing countries.

In the wake of the new facts, theory has responded, particularly with a class of models that emphasizes selection mechanisms into production and trade, thereby allowing inequality to increase everywhere with openness. These new models will need to be developed, fleshed out, and applied in different contexts of trade, investment, and outsourcing. Empirical work will depend on the availability of high quality, firm-level, data, and there will need to be considerable investment in the generation of such data, particularly for low-income countries. Further, the empirical work will also need to link the firm data to household data in order to follow through on the implications for the personal distribution. More generally, there is a need to tie together the analysis of factor incomes with the implications for the personal income distribution.

Inequality is not just interpersonal inequality but also involves inequality across broadly defined groups—gender and regional groups being prime examples as well as ethno-linguistic groupings (not covered in this chapter)—adding another dimension of key policy concern. Further empirical work will need to document the impact of different aspects of globalization on these dimensions of inequality, and theorizing will need to extend and modify the standard H-O model, or indeed the more recent selectionbased models, to incorporate structural divides along salient socioeconomic groupings.

At the level of national policy, addressing the inequality consequences of globalization is in principle no different than addressing the inequality consequences of other forces, such as technical progress (although global integration tightens the transmission mechanism from technical change in one part of the world to another).

However, greater mobility of goods, capital, and labor constrains the freedom of governments to mitigate inequality through redistributive instruments. More research is needed to delineate, in theoretical and empirical terms, the nature of these constraints and the gains of global coordination on tax and expenditure policy and on labor and capital regulation. In the realm ofpractical policy, there is also a fairly full agenda, ranging from the implementation of redistributive schemes like Conditional Cash Transfers (CCTs) at the national level, and the use of existing global institutions such as the ILO and the WTO to put a floor on a race to the bottom in taxation and redistribution at the international level.

Having animated the economic analysis and policy discourse for the past half century, the globalization-inequality nexus seems set to continue doing so in the coming decades.

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