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Credit constraints, inequality and the growth gains from trade

Listed author(s):
  • Caselli, Mauro

This paper tests the hypothesis that, in the presence of credit constraints, higher wealth inequality affects negatively the growth gains from trade liberalisation. Variations in the growth rate of value added–decomposed in the growth rate of the number of establishments and the growth rate in average size–of manufacturing industries in 34 developing countries before and after trade liberalisation are used to study the effects of inequality on the difference in growth under liberalised and nonliberalised regimes. The results show that the number of firms in industries with high dependence on external finance in countries with higher inequality grow significantly slower, in both statistical and economic terms, than in industries with low dependence on external finance in countries with lower inequality following a trade liberalisation relative to the closed-economy period.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176513003200
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 121 (2013)
Issue (Month): 1 ()
Pages: 43-47

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Handle: RePEc:eee:ecolet:v:121:y:2013:i:1:p:43-47
DOI: 10.1016/j.econlet.2013.06.038
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
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  8. Mauro Caselli, 2012. "Does wealth inequality reduce the gains from trade?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 333-356, June.
  9. E.H.P. Frankema, 2005. "The Colonial Origins of Inequality: Exploring the Causes and Consequences of Land Distribution," Ibero America Institute for Econ. Research (IAI) Discussion Papers 119, Ibero-America Institute for Economic Research.
  10. Gustafsson, Peter & Segerstrom, Paul, 2010. "North-South trade with increasing product variety," Journal of Development Economics, Elsevier, vol. 92(2), pages 97-106, July.
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  12. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
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  16. repec:dgr:rugggd:gd-81 is not listed on IDEAS
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