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Openness, inequality and poverty: Endowments matter

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  • Julien Gourdon
  • Nicolas Maystre
  • Jaime de Melo

Abstract

Using tariffs as a measure of openness, this paper finds consistent evidence that the conditional effects of trade liberalization on inequality are correlated with relative factor endowments. Trade liberalization, measured by changes in tariff revenues, is associated with increases in inequality in countries well-endowed with highly skilled workers and capital or with workers that have very low education levels. Similar, although less robust, results are also obtained when decile data are used instead of the usual Gini coefficients. Taken together, the results are strongly supportive of the factor-proportions theory of trade and suggest that trade liberalization in poor countries where the share of the labor force with little education is high raises inequality. Simulation results also suggest that relatively small changes in inequality as measured by aggregate measures of inequality, like the Gini coefficient, are magnified when estimates are carried out using decile data.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 17 (2008)
Issue (Month): 3 ()
Pages: 343-378

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Handle: RePEc:taf:jitecd:v:17:y:2008:i:3:p:343-378

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Related research

Keywords: international trade; income distribution; poverty;

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References

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  1. Bensidoun, Isabelle & Jean, Sébastien & Sztulman, Aude, 2011. "International trade and income distribution : reconsidering the evidence," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/4212, Université Paris-Dauphine.
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Citations

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Cited by:
  1. Bensidoun, Isabelle & Jean, Sébastien & Sztulman, Aude, 2011. "International trade and income distribution : reconsidering the evidence," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/4212, Université Paris-Dauphine.
  2. Meschi, Elena & Vivarelli, Marco, 2007. "Globalization and Income Inequality," IZA Discussion Papers 2958, Institute for the Study of Labor (IZA).
  3. Xiaodong Lu & Guowei Cai, 2011. "Effective factor endowments, trade openness and income distribution in China," Frontiers of Economics in China, Springer, vol. 6(2), pages 188-210, June.
  4. Bergh, Andreas & Nilsson, Therese, 2010. "Do liberalization and globalization increase income inequality?," European Journal of Political Economy, Elsevier, vol. 26(4), pages 488-505, December.
  5. Stephen Dobson & Carlyn Ramlogan, 2008. "Is there an openness Kuznets curve? Evidence from Latin America," Working Papers 2008/10, Nottingham Trent University, Nottingham Business School, Economics Division.
  6. Meschi, Elena & Vivarelli, Marco, 2009. "Trade and Income Inequality in Developing Countries," World Development, Elsevier, vol. 37(2), pages 287-302, February.
  7. Caroline DAYMON, 2012. "Ouverture Commerciale, Inégalités De Revenu Et Répartition Salariale Dans Les Pays Du Sud Et De L’Est De La Méditerranée," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 35, pages 81-98.

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