Declining Global Income Inequality: Solow Convergence and Free Trade
As a follow-up to my comments on the Tim Worstell argument that free trade is the cause of declining global income inequality, let me cite a couple of things. First up is the work of Xavier Sala-i-Martin which Tim alludes to. While it is true that Sala-i-Martin has been noting a decline in global inequality, he attributes this decline to the convergence hypothesis, which he and Robert Barro discuss in their 1992 Journal of Political Economy paper. Simply put – as capital per capita rise in the poorer nations rise, their per capita income also rise. This, of course, is the Solow growth model argument.
But does the factor price equalization theorem has any role to play? Matthew J. Slaughter explores the links between Solow convergence and international income in Per Capita Income Convergence and the Role of International Trade.