HSG hosts prestigious international trade conference

8 June 2018.The annual gathering brings together leading economists and focuses on recent findings in international trade.

The University of St.Gallen (HSG) hosted the European Research in International Trade (ERWIT) conference, a yearly gathering focused on discussing recent findings and exploring new and upcoming research ideas and trends. The event was co-sponsored by the Swiss National Institute and was held in conjunction with the Centre for Policy Research.

25 Years of research

In his keynote speech, leading trade economist Elhanan Helpman (Harvard University) gave an overview to his new book, entitled Globalization and Inequality, which  amalgamates over 25 years of research into the topic.

He started from the historical observation that there have been two waves of globalisation, the second starting after the Second World War, which is still in the making. When looking at this wave of globalisation, especially recently, two significant trends stand out immediately; an expansion of international trade and a massive increase in wage inequality. One of Helpman’s central questions was: does global trade cause inequality in the distribution of income? Initially, especially labour economists believed that international trade is responsible in a large part, but in his talk, Helpman made clear that scientific evidence does not lend much support to this claim.

Increase in trade linked to a decrease in poverty

On a positive note, he made a strong point that since the 1980’s, when the world saw about 2.1 billion people living in poverty according to the OECD, that number has gradually decreased to 1.3 billion in 2007. His conclusion is that globalisation played a very important role in this development. Across country inequality has fallen due to globalisation.

On the other hand, Helpman reviewed a significant body of research that quantifies the contribution of trade openness to the sharp increase in within country inequality, a development experienced by most countries in the world. While workers of all levels of education typically see their real wages increase in the aftermath of a trade liberalisation episode, this gain accrues disproportionately to the part of the income distribution that is better off anyway. This rise in inequality due to globalisation, however, falls considerably short of accounting for the observed changes in disparity across workers – at most a fifth of the sharp increase can be explained.

Helpman concluded that trade has contributed to inequality, but that it does not appear to be the main driver behind it, with skill biased technological change and political factors as alternative suspects.