Impact of International Trade on Income Inequality in the United States

“Some believe that the growing trade with low-wage countries has been the main cause of rising income
inequality in the United States” (Krugman, Obstfeld and Melitz).
Report

From 1970, the income of Americans have been seen at an equalized level, where the
standards for living are seen for the poor and the lower middle class Americans who have been
falling mainly with major affluent Americans working on improvement. The trend is set towards
the inequality which is not confined to US.
With the rising population, there has been a major rise of income inequality on the
growing importance of the trading business. Here, the consideration is about how free trading
business has been able to handle the countries with a lower wage factor in the country. This has
also majorly harmed or threatened the people who are having a low skill-set as they are not able
to contribute much in advancement of the industrial countries. The arguments are used generally
for the North American Free Trade Agreement, where the warning is about that free trading
business that is done with the other countries like Mexico, leads to a major problem of loss in
jobs. This also leads to reduction in wages of the low-skilled workers in U.S., overall. The
equalization of tax is important that comes mainly with protecting Americans who are working
from the Asian and other workers of countries like Latin America. The international trading is
considered to be the engine for a better growth and the development, where the potential of the
growth is for driving the comparative advantage paradigm. According to the principle, the
country needs to specialize in the goods production with lower opportunity cost than the other
country, where the goods are then freely traded among one other.

The figure highlights about the changing rate of income for the Americans which is
mainly in different quantiles for handling the distribution of income. This is when there are
changes in time with pricing level and the sizing of the families. It is seen that in 1969, less time
was taken for supporting the families for maintaining a better living standard.
The insights are about economists with maintaining a higher collective profitability that
focus on competitive advantage in United States. The international trade theory is developed by
Heckscher-Ohlin who focuses on opening of trading offers for new areas to specialize