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International Trade and Income Distribution: Reconsidering the Evidence

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  • Isabelle Bensidoun
  • Sébastien Jean
  • Aude Sztulman

Abstract

This article reassesses the link between international trade and income distribution. We argue that one way to assess the influence of international trade upon income distribution is to take account of each country’s specific trade patterns by measuring the changes in the factor content of trade. The econometric specification is based on changes in Gini indices (over non-overlapping 4-year intervals), computed exclusively from series drawn from the same source. Our results show that a change in the factor content of trade has a significant impact on income distribution. The sign and magnitude of this impact is conditional on the national income level. We find that an increase in the labor content of trade raises income inequality in poor countries, but reduces it in rich countries (the reverse is true for the capital content of trade). In particular, we show that in the 1980s and 1990s, international trade may have contributed significantly to widening income inequalities in developing countries.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2005-17.

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Date of creation: Oct 2005
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Handle: RePEc:cii:cepidt:2005-17

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Keywords: International trade; International integration; Globalization; Income; Growth;

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References

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Citations

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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. Caselli, Mauro, 2009. "Does wealth inequality reduce the gains from trade?," MPRA Paper 15329, University Library of Munich, Germany.
  3. Gourdon, Julien & Maystre, Nicolas & de Melo, Jaime, 2006. "Openness, inequality, and poverty : endowments matter," Policy Research Working Paper Series 3981, The World Bank.
  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. Meschi, Elena & Vivarelli, Marco, 2007. "Globalization and Income Inequality," IZA Discussion Papers 2958, Institute for the Study of Labor (IZA).
  6. Muhammad, Shahbaz & Faridul, Islam & Muhammad Sabihuddin, Butt, 2011. "Devaluation and income inequality: Evidence from Pakistan," MPRA Paper 35522, University Library of Munich, Germany, revised 21 Dec 2011.

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