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Openness and Income Dispaities: Does Trade Explain the 'Mezzogiorno' Effect?

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  • Claudia M. Buch
  • Paola Monti

    ()

Abstract

Many theoretical models show that trade openness has positive welfare implications. Yet, openness might affect different social groups and regions asymmetrically, even within a given country. We use Italian regional data to answer the question whether trade openness affects within-country income differentials. In Italy, the more affluent regions are internationally more open than poorer ones not only with respect to trade in goods, but also with respect to FDI and international migration. Prima facie, there is a positive correlation between openness and per capita income. Studying this relationship empirically requires taking into account the endogenous component of openness. We apply panel cointegration and instrumental variables techniques to account for the endogeneity of trade. Our results show a positive link between trade openness and the level of income per capita.

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Bibliographic Info

Paper provided by Institut für Angewandte Wirtschaftsforschung (IAW) in its series IAW Discussion Papers with number 41.

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Length: 39 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:iaw:iawdip:41

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Keywords: Openness; growth; regional income disparities; Italian regions;

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References

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  1. Peter Blair Henry, 2006. "Capital Account Liberalization: Theory, Evidence, and Speculation," NBER Working Papers 12698, National Bureau of Economic Research, Inc.
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  16. Robert E. Baldwin, 2004. "Openness and Growth: What’s the Empirical Relationship?," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 499-526 National Bureau of Economic Research, Inc.
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Cited by:
  1. Stanislav Cernosa, 2011. "Openness to Trade, Migration and Foreign Direct Investments of the EU," WIFO Working Papers 401, WIFO.

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