Since the expansion of world trade in the 1980s, measures of inequality have risen not only in developed countries, but also throughout the developing world. This stylized fact is contrary to the predictions of classical trade theory that in countries with high endowments of unskilled labor,...

We consider two channels via which foreign inputs into industrial production may lead to productivity effects. The first one concerns dynamic externalities between firms which share technical and organizational knowledge which is vital for the productivity growth of a particular industry. We...