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Trade and Regional Inequality

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  • Andrés Rodríguez‐Pose

Abstract

This paper examines the relationship between openness and within-country regional inequality across 28 countries over the period 1975-2005, paying special attention to whether increases in global trade affect the developed and developing world differently. Using a combination of static and dynamic panel data analysis, it is found that while increases in trade per se do not lead to greater territorial polarisation, in combination with certain country-specific conditions, trade has a positive and significant association with regional inequality. In particular, states with higher interregional differences in sectoral endowments, a lower share of government expenditure, and a combination of high internal transaction costs with a higher degree of coincidence between the regional income distribution and regional foreign market access positions have experienced the greatest rise in territorial inequality when exposed to greater trade flows. This means that changes in trade regimes have had a more polarising effect in low and middle income countries, whose structural features tend to potentiate the trade effect and whose levels of internal spatial inequality are, on average, significantly higher than in high income countries.

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Bibliographic Info

Article provided by Clark University in its journal Economic Geography.

Volume (Year): 88 (2012)
Issue (Month): 2 (04)
Pages: 109-136

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Handle: RePEc:bla:ecgeog:v:88:y:2012:i:2:p:109-136

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Citations

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Cited by:
  1. Leonel Muinelo-Gallo & Andreas P. Kyriacou & Oriol Roca-Sagalés, 2013. "Fiscal decentralization and regional disparities: the importance of good governance," Documentos de Trabajo (working papers) 13-03, Instituto de Economía - IECON.
  2. Farole, Thomas & Reis, Jose Guilherme & Wagle, Swarnim, 2010. "Analyzing trade competitiveness : a diagnostics approach," Policy Research Working Paper Series 5329, The World Bank.
  3. Ezcurra, Roberto & Rodríguez-Pose, Andrés, 2013. "Does Economic Globalization affect Regional Inequality? A Cross-country Analysis," World Development, Elsevier, vol. 52(C), pages 92-103.
  4. Georg Hirte & Christian Lessmann, 2014. "Trade, Integration, and Interregional Inequality," CESifo Working Paper Series 4799, CESifo Group Munich.
  5. Lessmann, Christian, 2014. "Spatial inequality and development — Is there an inverted-U relationship?," Journal of Development Economics, Elsevier, vol. 106(C), pages 35-51.
  6. Guangdong Li & Chuanglin Fang, 2014. "Analyzing the multi-mechanism of regional inequality in China," The Annals of Regional Science, Springer, vol. 52(1), pages 155-182, January.

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