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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 & 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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Cited by:
  1. Meschi, Elena & Vivarelli, Marco, 2009. "Trade and Income Inequality in Developing Countries," World Development, Elsevier, vol. 37(2), pages 287-302, February.
  2. Bensidoun, Isabelle & Jean, Sébastien & Sztulman, Aude, 2011. "International trade and income distribution : reconsidering the evidence," Economics Papers from University Paris Dauphine 123456789/4212, Paris Dauphine University.
  3. 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.
  4. 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.
  5. Oloufade, Djoulassi K., 2012. "Trade Openness, Conflict Risk and Income Inequality," MPRA Paper 40702, University Library of Munich, Germany, revised Feb 2013.
  6. Meschi, Elena & Vivarelli, Marco, 2007. "Globalization and Income Inequality," IZA Discussion Papers 2958, Institute for the Study of Labor (IZA).
  7. G. C. Lim & Paul D. McNelis, 2014. "Income Inequality, Trade and Financial Openness," Melbourne Institute Working Paper Series wp2014n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  8. 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.

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