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Globalization, Trade, and Inequality: Evidence from a New Database

Author

Listed:
  • Borchert, Ingo

    (University of Sussex Business School)

  • Larch, Mario

    (University of Bayreuth)

  • Shikher, Serge

    (United States International Trade Commission)

  • Yotov, Yoto

    (Yoto V. Yotov, Drexel University, yotov@drexel.edu)

Abstract

We introduce the International Trade and Production Database for Simulation (ITPD-S) and use it, in combination with the International Trade and Production Database for Estimation (ITPD-E), to quantify the impact of globalization on bilateral trade, real income, and inequality in the world at the industry level in 1990-2019. To perform the analysis, we rely on a new quantitative trade model, which enables us to estimate the magnitude of globalization and then perform a counterfactual analysis of the impact of globalization on real output within the same framework. Our estimates reveal that, on average, bilateral globalization forces have led to a remarkable increase in international trade of about 570%, between 1990 and 2019, with very wide but intuitive variation across industries. Our counterfactual analysis reveals that globalization has benefited most countries but relatively more so smaller and more open economies, which are typically developing countries. As a result, this ‘catch-up’ implies less cross-country income inequality.

Suggested Citation

  • Borchert, Ingo & Larch, Mario & Shikher, Serge & Yotov, Yoto, 2024. "Globalization, Trade, and Inequality: Evidence from a New Database," School of Economics Working Paper Series 2024-6, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2024_006
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    More about this item

    Keywords

    Trade dataset; Domestic trade; Globalization; Inequality; Disaggregated simulation analysis; Gravity;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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