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This paper examines the extent to which the process of globalization can explain the observed widening in the cross--country distribution of output--per--worker. In particular, we examine whether the opening up of trade in a Hecksher--Ohlin type model of trade can explain the observed changes. On the theoretical front the model highlights that, when the labor market is subject to a holdup problem, then the opening up of trade can cause an increase in the dispersion of income across countriesdoi:10.3386/w10565 fatcat:3kbwywyhanchzlwk2glxz46rcy