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Openness and Inequality in Developing Countries: A New Look at the Evidence

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  • Gourdon, Julien

Abstract

Integration to world markets is expected to help developing countries to access prosperity. At the same time, increasing opportunities to trade are likely to affect income distribution and whether or not increasing openness to trade is accompanied by a reduction or an increase inequality is highly controversial. This paper brings new evidence on this issue in using a data set covering a large sample of developing countries and a model with improved controls for omitted variables and a new index of trade openness. Trade liberalization increases inequality in countries that relatively well-endowed in capital. Our model assumes that it might be fruitful to breakdown unskilled labor into non-educated and primary-educated as suggested by Wood (1994). The results show that trade liberalization increases inequality in highly educated abundant countries whereas it decreases inequality in primary educated abundant countries. However it increases inequality in non educated abundant countries, suggesting that this part of population does not benefit from trade openness since it is not included in export oriented sectors.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4176.

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Date of creation: Dec 2006
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Handle: RePEc:pra:mprapa:4176

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Keywords: International Trade; Income Distribution; Poverty;

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Cited by:
  1. Kui-Wai Li, 2012. "Analyzing the Kuznets Relationship using Nonparametric and Semiparametric Methods," CIRJE F-Series CIRJE-F-839, CIRJE, Faculty of Economics, University of Tokyo.

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