Trade and wage inequality

Alan Blinder writes:

Many Americans are justifiably distressed about rising income inequality, but foreign competition gets far too much of the blame. In fact, the best and most comprehensive studies of the inequality question assign international trade only a bit part in the drama. The main protagonists are all domestic, including changes in technology, the decline of unions, failures of public policy and changing social attitudes toward inequality.

(Stop the World (and Avoid Reality), New York Times, January 6, 2008).  Dani Rodrik says that this implies that most economists feel that trade is a minor factor.  He says that, there are some very capable economists who think otherwise (Trade and wages, January 6):

I have never understood why the work of Rob Feenstra and Gordon Hanson is overlooked in this context. These two are among the very best empirical trade economists today (and Feenstra is the author of the most widely used graduate-level textbook in trade). In a series of papers, they have argued that outsourcing and global production sharing act just like skill-biased technological change, and they have played an important role in shaping wage inequality. Their empirical work is careful and driven by a compelling theoretical model of within-industry specialization. 

To get a flavor of their results, here is how they summarize their empirical work:

Thus, whether outsourcing is more or less important than computers depends of whether the latter are measured as a share of the capital stock, or as a share of investment. It is fair to conclude that both these variables are important explanations of the shift towards nonproduction labor, with their exact magnitudes depending on how they are measured.

Comments

[David Jobs Bournemouth Agency]

Does it also not imply weak leadership, as the whole point of electing somebody into power is to make the uncomfortable decisions that people dont want but benefits everybody not just the rich minority.