Trade and regional inequality
AbstractThis paper examines the relationship between openness and within-country regional inequality across 28 countries over the period 1975-2005, paying special attention to whether increases in global trade affect the developed and developing world differently. Using a combination of static and dynamic panel data analysis, we find that while increases in trade per se do not lead to greater territorial polarization, in combination with certain country-specific conditions, trade has a positive and significant association with regional inequality. In particular, states with higher inter-regional differences in sector endowments, a lower share of government expenditure, and a combination of high internal transaction costs with a higher degree of coincidence between the regional income distribution and regional foreign market access positions have experienced the greatest rise in territorial inequality when exposed to greater trade flows. This means that changes in trade regimes have had a more polarizing effect in low and middle-income countries, whose structural features tend to potentiate the trade effect and whose levels of internal spatial inequality are, on average, significantly higher than in high-income countries.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 5347.
Date of creation: 01 Jun 2010
Date of revision:
Economic Theory&Research; Regional Economic Development; Free Trade; Trade Policy; Emerging Markets;
Other versions of this item:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-03 (All new papers)
- NEP-DEV-2010-07-03 (Development)
- NEP-GEO-2010-07-03 (Economic Geography)
- NEP-INT-2010-07-03 (International Trade)
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