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Long-run dynamics between trade liberalization and income inequality in the European Union: a second generation approach

Author

Listed:
  • Mert Akyuz

    (Ankara Yildirim Beyazit University)

  • Ghislain Nono Gueye

    (Louisiana Tech University)

  • Cagin Karul

    (Pamukkale University)

Abstract

The surprisingly limited literature investigating whether there exists a long-run association between trade liberalization and income inequality finds strong evidence for it. We point out a possible model misspecification due to ignoring the presence of cross-section dependence. Using a panel of 15 EU countries in the 1985–2017 period we show that there is strong evidence for the presence of cross-section dependence. Therefore, we use so-called second-generation procedures (which are robust to cross-section dependence) and find no evidence that trade liberalization and income inequality share a long-run cointegrating relationship in the European Union.

Suggested Citation

  • Mert Akyuz & Ghislain Nono Gueye & Cagin Karul, 2022. "Long-run dynamics between trade liberalization and income inequality in the European Union: a second generation approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(3), pages 769-792, August.
    • Handle: RePEc:kap:empiri:v:49:y:2022:i:3:d:10.1007_s10663-022-09539-8
    DOI: 10.1007/s10663-022-09539-8
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    More about this item

    Keywords

    Trade liberalization; Income inequality; Panel cointegration; Cross-section dependence; European Union;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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