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Regional Income Inequality and International Trade

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Author Info

  • Julie Silva
  • Robin Leichenko

Abstract

International trade is frequently cited as a cause of rising income inequality between individuals and across countries. Less attention has been paid to the effects of trade on inequality across regions within countries. Trade may enhance regional inequalities due to differences in regional trade involvement and in the prices of export and import-competing goods produced in different regions. This study investigates the effects of trade on income inequality across regions in the United States. Using both structural and price-based measures of regional trade involvement, we evaluate the effects of trade on inequality within and across states, the metro and nonmetro portions of the states, and the major Census regions. Across all states and across metro and nonmetro areas, we find that trade affects inequality primarily via import and export prices. In contrast to our expectations, however, a weaker dollar —more expensive imports and cheaper exports — is associated with a worsening of a state’s position relative to other states, and greater inequality within a state. Across the Census regions, both our price and measures had significant effects, but the direction of these effects varied by region. Whereas most regions benefited from cheaper imports, states located in regions that are traditionally home to low-wage sectors, including the Southeast and South Central regions, were made relatively worse off by lower import prices and by greater orientation toward import-competing goods. Our findings reinforce notions about the uneven impacts of globalization and suggest that policy measures are needed to ensure that both the benefits and costs of international trade involvement are shared across regions.

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File URL: ftp://ftp2.census.gov/ces/wp/2003/CES-WP-03-15.pdf
File Function: First version, 2003
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 03-15.

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Length: 54 pages
Date of creation: Jul 2003
Date of revision:
Publication status: Published in Economic Geography, 2004, pages 261-286
Handle: RePEc:cen:wpaper:03-15

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Related research

Keywords: regional income inequality; economic globalization; regional development;

References

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  1. Ngarambe, Octavian & Goetz, Stephan J. & Debertin, David L., 1998. "Regional Economic Growth And Income Distribution: County-Level Evidence From The U.S. South," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 30(02), December.
  2. Topel, Robert H, 1994. "Regional Labor Markets and the Determinants of Wage Inequality," American Economic Review, American Economic Association, vol. 84(2), pages 17-22, May.
  3. Partridge, Mark D. & Rickman, Dan S. & Levernier, William, 1996. "Trends in U.S. income inequality: Evidence from a panel of states," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(1), pages 17-37.
  4. Sachs, Jeffrey D & Shatz, Howard J, 1996. "U.S. Trade with Developing Countries and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 234-39, May.
  5. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
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Citations

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Cited by:
  1. Rigby, D L & Breau, Sebastien, 2007. "Impacts of Trade on Wage Quality in Los Angeles: Analysis Using Matched Employer-Employee Data," Center for Global, International and Regional Studies, Working Paper Series qt0fh5z1hf, Center for Global, International and Regional Studies, UC Santa Cruz.
  2. Andres Rodriguez-Pose & Nicholas Gill, 2004. "How does trade affect regional inequalities?," ERSA conference papers ersa04p478, European Regional Science Association.
  3. David Rigby & Sebastien Breau, 2006. "Impacts of Trade on Wage Inequality in Los Angeles: Analysis Using Matched Employer-Employee Data," Working Papers 06-12, Center for Economic Studies, U.S. Census Bureau.
  4. Nuno Crespo & Maria Paula Fontoura, 2008. "Regional Integration and International Economic Geography in the Portuguese Case - an update," Working Papers Department of Economics 2008/51, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  5. Jean-Paul Faguet & Mahvish Shami, 2008. "Fiscal policy and spatial inequality in Latin America and beyond," LSE Research Online Documents on Economics 27162, London School of Economics and Political Science, LSE Library.

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