In other words, the global output gap may become a more important determinant of domestic inflation, at the expense of the domestic output gap. Another important structural channel to consider is the linkage between cross-border integration and income distribution. It is generally understood that increased trade penetration and specialization leads to the offshoring of labour-intensive, lowerproductivity fragments of the supply process.
This leads to higher average productivity levels and higher incomes domestically. Logically, it may also lead to an increase in domestic income dispersion, a widely observed stylized fact of the past 20 years and much discussed in the United States.