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International Trade and Per Capita Income Convergence: A Difference-in-Differences Analysis

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  • Matthew J. Slaughter
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    Abstract

    In this paper I analyze whether international trade contributes to per capita income convergence across countries. The analysis focuses on four important post-1945 multilateral trade liberalizations. To identify trade's effect on income dispersion, in each case I use a difference-in-differences' approach which compares the convergence pattern among the liberalizing countries before and after liberalization with the convergence pattern among randomly chosen control countries before and after liberalization. My main empirical result is that trade liberalization did not trigger convergence in any of the four cases. If anything, trade seems to have caused income divergence.

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    File URL: http://www.nber.org/papers/w6557.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6557.

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    Date of creation: May 1998
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    Publication status: published as Slaughter, Matthew J. "Trade Liberalization And Per Capita Income Convergence: A Difference-In-Differences Analysis," Journal of International Economics, 2001, v55(1,Oct), 203-228.
    Handle: RePEc:nbr:nberwo:6557

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    1. Matthew J. Slaughter, 1997. "Per Capita Income Convergence and the Role of International Trade," NBER Working Papers 5897, National Bureau of Economic Research, Inc.
    2. Ben-David, Dan, 1996. "Trade and convergence among countries," Journal of International Economics, Elsevier, Elsevier, vol. 40(3-4), pages 279-298, May.
    3. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, Elsevier, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
    4. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236 Elsevier.
    5. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(2), pages 253-66, April.
    6. David T. Coe & Elhanan Helpman, 1993. "International R&D Spillovers," NBER Working Papers 4444, National Bureau of Economic Research, Inc.
    7. David T. Coe & Elhanan Helpman & Alexander Hoffmaister, 1995. "North-South R&D Spillovers," NBER Working Papers 5048, National Bureau of Economic Research, Inc.
    8. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, American Economic Association, vol. 86(5), pages 1216-38, December.
    9. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
    10. Deardorff, Alan V., 1986. "Firless firwoes: How preferences can interfere with the theorems of international trade," Journal of International Economics, Elsevier, Elsevier, vol. 20(1-2), pages 131-142, February.
    11. Richard Baldwin, 1989. "Measureable Dynamic Gains from Trade," NBER Working Papers 3147, National Bureau of Economic Research, Inc.
    12. Samuel S. Kortum & Jonathan Eaton, 1995. "Trade in ideas: patenting and productivity in the OECD," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 95-9, Board of Governors of the Federal Reserve System (U.S.).
    13. Kiminori Matsuyama, 1996. "Why Are There Rich and Poor Countries? Symmetry-Breaking in the World Economy," NBER Working Papers 5697, National Bureau of Economic Research, Inc.
    14. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1733, Harvard - Institute of Economic Research.
    15. Slaughter, Matthew J, 1997. "Per Capita Income Convergence and the Role of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 87(2), pages 194-99, May.
    16. Matthew J. Slaughter, 1995. "The Antebellum Transportation Revolution and Factor-Price Convergence," NBER Working Papers 5303, National Bureau of Economic Research, Inc.
    17. Leamer, E.E., 1995. "The Heckscher-Ohlin Model in Theory and Practice," Princeton Studies in International Economics, International Economics Section, Departement of Economics Princeton University, 77, International Economics Section, Departement of Economics Princeton University,.
    18. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 653-79, August.
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    Cited by:
    1. Andrew B. Bernard & J. Bradford Jensen, 1999. "Exporting and Productivity," NBER Working Papers 7135, National Bureau of Economic Research, Inc.
    2. David E. A. Giles, 2001. "Output Convergence and International Trade: Time-Series and Fuzzy Clustering Evidence for New Zealand and Her Trading Partners, 1950-1992," Econometrics Working Papers, Department of Economics, University of Victoria 0102, Department of Economics, University of Victoria.
    3. Singh, Ajit, 1999. "The role of employment and work in poverty eradication and empowerment and advancement of women," MPRA Paper 54923, University Library of Munich, Germany.
    4. Alessia Lo Turco, 2005. "South-South Trade Agreements, Location of Production and Inequality in Latin America," Ibero America Institute for Econ. Research (IAI) Discussion Papers, Ibero-America Institute for Economic Research 127, Ibero-America Institute for Economic Research.
    5. Singh, Ajit & Zammit, Ann, 2000. "International Capital Flows: Identifying the Gender Dimension," World Development, Elsevier, Elsevier, vol. 28(7), pages 1249-1268, July.
    6. Singh, Ajit, 1999. "Global economic trends, development and social policy at Copenhagen plus five," MPRA Paper 53557, University Library of Munich, Germany.

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