Developing Countries' Increasing Weight in World Trade, Openness, and Convergence

Over approximately the last two decades, developing countries have substantially increased their weight in global markets. This process is a defining feature of the recent economic globalization and has significantly affected output and employment across countries. To measure and analyze this process from a long-run perspective, we introduce the exporters' relative average income indicator and show how this indicator can be broken down into an openness-income correlation component and a cross-country income inequality component. We use this indicator to study the timing, intensity, and proximate determinants of the changes in the relative weight of richer and poorer countries in international trade over the 1961-2014 period. We also assess the extent to which the recent changes are due to the extraordinary growth of China and how its measurement is affected by the difference between PPP and national account values and by the increasing gap between value-added and gross exports.