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Economic Openness And Income Inequality: Chinese Provincial Evidence In The 1990s


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    (Department of Economics and Finance, Franklin P. Perdue School of Business, Salisbury University, Salisbury, MD 21801, USA)


    (Department of Economics and Finance, Franklin P. Perdue School of Business, Salisbury University, Salisbury, MD 21801, USA)

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    China in the 1990s was a large labor-abundant country at its early phase of global integration. This paper develops a framework that applies a Gini-coefficient–related measure of income inequality to the Heckscher–Ohlin model and analyzes the effects on income inequality of economic openness to foreign trade and capital. Our findings from generalized least squares regression of Chinese provincial data suggest that increased openness tends to lower income inequality in China of the 1990s. Ignoring provincial differentials, China's income inequality decreases as the trade-to-GDP ratio and the interaction between FDI and fiscal deficit increase respectively, though income inequality increases with the deficit-to-GDP ratio and the interaction between trade and financial deepening. With respect to the province-specific effect, however, trade openness and FDI tend to increase income inequality when they are examined jointly with the interaction of financial deepening and government budget balance.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal China Economic Policy Review.

    Volume (Year): 01 (2012)
    Issue (Month): 02 ()
    Pages: 1250010-1-1250010-21

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    Handle: RePEc:wsi:ceprxx:v:01:y:2012:i:02:p:1250010-1-1250010-21

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    Keywords: Income inequality; Heckscher–Ohlin model; economic openness; Chinese provinces; F16; O16; P45;

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