Paul Krugman began the recent presentation of his new study of trade and wages at the Brookings Institution.Krugman, a leading trade economist and also a New York Times columist concluded in his1995 Brookings paper that international trade with poor countries played only a small role in America's rising wage inequality. He states how international trade explains only 10% of the widening income gap between skilled and unskilled workers during the 1980s. Krugman has undertaken several studies theroughout the 1990's and states that his findings have been the same. Krugman has been seen to have a very influential role in influencing ecomomists; based on his work it is now commonly accepted that trade was only a small player in causing wage inequality. ln-line with the ricardian argument, Krugman claims that other factors, especially technological change are more liable for the change in wage inequality.⁽²⁵⁾        

Krugman states how although trade brings benefit to the economy as a whole, it completely disrupts income distibution. When countries with a relatively high proportion of high-skilled workers increases trade with countries with proportionately lower levels of skilled workers, the low skilled workers in the high-skilled countries lose out. Krugman states how traditionally the impact of this appeared modest and ecomists were inclined to brush it under the carpet. However, he states how in recent years this problem has risen to the surface again, Americans in particular are now increasingly concerned with the negative impacts that globalisation is having on ordinary workers. Thus, whilst Krugner has previously claimed that the impact of international trade on wage inequality was minor he now claims "there's a good case that it is big and getting bigger". Krugner put this down to increased trade with poor countries, especially China as well as an increase in the growth of the "fragmentation of products", which has meant that more tasks and products have become tradeable that have enabled more competition on labour intensive jobs from foreign competition.

Krugman states how poor countries share  of the manufacturing market has doubled and in comparison to the 1980's the average wage of America's top-ten trading partners has fallen since 1990. Based on Krugman's 1995 paper Josh Bivens (of the economic policy institute, Washingtonm DC) updated Krugman's figures to take into account todays trade patterns to find the effect on wages and wage inequality. He found that international trade has increased wage inequality between skilled workers and unskilled workers by 2.1% (From 4.8% in 1995 to 6.9% in 2006) ⁽²⁵⁾

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