By Keith Griffin (auth.)
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Extra resources for International Inequality and National Poverty
Example text
DISTRIBUTION OF THE GAINS FROM TRADE Granted, then, that the underdeveloped countries are highly specialised producers and have fully participated in the international division of labour, the question as to whether and by how much they have gained from trade arises. The most widely accepted answer is presented in terms of production frontiers and community indifferent curves. Assuming full employment, perfect competition, resource mobility and factorprice flexibility it can be shown that trade leads to greater specialisation 22 International Inequality and National Poverty and higher welfare and income.
Of the mass of the population. Figure 2 indicates that wages received by the remaining professionals increases by a total amount equivalent to W 1 W 2AB. This is also equivalent to the loss incurred by The international transmission of inequality 29 non-professionals, arising from the change in the distribution of income. In other words, there are two components to the losses inflicted on the non-professional classes: an income effect (ABC) and a distribution effect (WI W 2AB). The total loss is the sum of these two: WI W 2 AC.
18 The development of new products and techniques has sometimes dislocated their economies and we shall argue below that in some cases it has increased their rigidity and lowered the rate of growth. The most widely accepted theories of international trade would lead one to believe that the free flow of commodities and factors of production would tend to reduce international inequality and accelerate the growth of the most backward economies. There is no evidence, however, that this has happened.
