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International trade, geographic heterogeneity and interregional inequality

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  • Hirte, Georg
  • Lessmann, Christian
  • Seidel, André

Abstract

We study the effect of international trade on interregional income inequality from 1992 to 2012 in the majority of countries worldwide using satellite night-light-based inequality proxies. For our analysis, we develop novel indicators for within-country heterogeneity in trade costs that are based on exogenous geographical features. In order to deal with potential endogeneity issues, we apply a gravity-style instrument that utilizes the occurrence of large natural disasters striking trade partners, as well as a Bartik-style instrument. In contrast to previous studies, our IV estimates reveal that international trade aggravates economic disparities only in those countries that have a higher within-country heterogeneity in terms of their access to the world market and their within-country trade costs.

Suggested Citation

  • Hirte, Georg & Lessmann, Christian & Seidel, André, 2020. "International trade, geographic heterogeneity and interregional inequality," European Economic Review, Elsevier, vol. 127(C).
    • Handle: RePEc:eee:eecrev:v:127:y:2020:i:c:s0014292120300593
    DOI: 10.1016/j.euroecorev.2020.103427
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    2. Cuesta, Lizeth & Ruiz, Yomara, 2021. "Efecto de la globalización sobre la desigualdad. Un estudio global para 104 países usando regresiones cuantílicas [Effect of globalization on inequality. A global study for 104 countries using quan," MPRA Paper 111022, University Library of Munich, Germany.
    3. Achten, Sandra & Lessmann, Christian, 2020. "Spatial inequality, geography and economic activity," World Development, Elsevier, vol. 136(C).
    4. Ponce, Pablo & Yunga, Fernando & Larrea-Silva, Jhohana & Aguirre, Nikolay, 2023. "Spatial determinants of income inequality at the global level: The role of natural resources," Resources Policy, Elsevier, vol. 84(C).
    5. Rodríguez-Pose, Andrés & Terrero-Davila, Javier & Lee, Neil, 2023. "Left-behind versus unequal places: interpersonal inequality, economic decline, and the rise of populism in the USA and Europe," LSE Research Online Documents on Economics 118537, London School of Economics and Political Science, LSE Library.
    6. Kacou Yves Thierry Kacou, 2022. "Interregional inequality in Africa, convergence, and multiple equilibria: Evidence from nighttime light data," Review of Development Economics, Wiley Blackwell, vol. 26(2), pages 918-940, May.
    7. Doan Ho Dan Tam & Nguyen Phuc Phuong Vy & Nguyen Thi Xuan Tham & Hoang Thi Ngoc Thang, 2021. "Trade and income distribution: Is natural disaster an actor?," HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE, HO CHI MINH CITY OPEN UNIVERSITY, vol. 11(1), pages 60-72.
    8. Ott, Ingrid & Soretz, Susanne, 2022. "Institutional design and spatial (in)equality — The Janus face of economic integration," European Journal of Political Economy, Elsevier, vol. 73(C).
    9. Steven Brakman & Tijl Hendrich & Charles Marrewijk & Jennifer Olsen, 2022. "Is Holland a Lumpy Country? An application of the Lens-Condition to Dutch Cities," De Economist, Springer, vol. 170(3), pages 305-321, August.
    10. Ioanna Konstantakopoulou, 2020. "Further Evidence on Import Demand Function and Income Inequality," Economies, MDPI, vol. 8(4), pages 1-12, October.
    11. Roberto Ezcurra & Alba Villar, 2021. "Globalization and spatial inequality: Does economic integration affect regional disparities?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(2), pages 335-358, October.
    12. Eduardo I Palavicini Corona, 2021. "Globalisation and local economic development: Place-based and bottom-up public policies in Switzerland and Mexico," Local Economy, London South Bank University, vol. 36(2), pages 98-114, March.
    13. Yuwan Duan & Erik Dietzenbacher & Bart Los & Ruochen Dai, 2023. "Regional inequality in China during its rise as a giant exporter: A value chain analysis," Journal of Regional Science, Wiley Blackwell, vol. 63(1), pages 148-172, January.
    14. Andres Rodriguez-Pose & Javier Terrero-Davila & Neil Lee, 2023. "Left-behind vs. unequal places: interpersonal inequality, economic decline, and the rise of populism in the US and Europe," Papers in Evolutionary Economic Geography (PEEG) 2306, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Mar 2023.
    15. Clara Pérez‐Cornejo & Pablo Rodríguez‐Gutiérrez & Esther de Quevedo‐Puente, 2023. "City reputation and the role of sustainability in cities," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(3), pages 1444-1455, June.
    16. Waclaw Szygula & Teresa Luczka, 2021. "International Trade in Goods and Services of Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 5), pages 772-781.
    17. Frederik Wild & David Stadelmann, 2022. "Coastal proximity and individual living standards: Econometric evidence from georeferenced household surveys in sub‐Saharan Africa," Review of Development Economics, Wiley Blackwell, vol. 26(4), pages 1883-1901, November.

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    More about this item

    Keywords

    Interregional inequality; Spatial inequality trade; Trade costs; Heterogeneous geography; Gravity model; Panel data;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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