Globalization and Inequality - Trinity College Dublin

hit these economies during the late 19 th century, and calculate the contribution of each of these
forces to the patterns of convergence and divergence which the data reveal. In each case, the
methodology is the same: calculate the impact of trade, or migration, or capital flows, on real wages
in a peripheral country, on the one hand, and Britain and the US on the other. Infer what the impact
of the shock on the real wage gap between core and periphery is, and express this change as a
percentage of the total change in the wage gap. Mass migration and international capital flows
explained between a third and a half of the Scandinavian catch-up on Britain, and between 48 and
88% of Scandinavia’s catch-up on the USA; they explained over two-thirds of the Irish and Italian
catch-up on Britain, and all of those two countries’ catch-up on the USA. Moreover, the Iberian
failure to converge on the leaders can in large part be attributed to their failure to import enough
capital and send out enough people.
Globalization thus helped several peripheral European countries converge on the core, while
insufficient globalization helps to explain Iberia’s failure to converge. The crucial factor was
migration, which accounted for some 70% of the total convergence experienced in the Atlantic
economy during the period (Taylor and Williamson 1997); trade may have been important for
within-country distribution, but it played a much more minor role insofar as between-country
distribution was concerned. 9 It seems as though the rising between-country inequality of the late
19 th century was not due to globalization.
Globalization and Inequality in the Late 20 th Century
The Heckscher-Ohlin model provides a good guide to the late 19 th century experience, in
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And, as mentioned, capital flows were actually a force for divergence.
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