Trade and price-index inequality

This commentary reviews the literature exploring the impact of international trade on the cost of living. We first summarize the strategies researchers have used to identify such impacts in the data before discussing the evidence for heterogeneity in price effects across income groups and across regions. Finally, we conclude with a discussion of how trade may have affected components of the price index such as differentiated manufactures and services where measurement is more challenging and where the existing literature has made less progress.