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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. Achten, Sandra & Lessmann, Christian, 2020. "Spatial inequality, geography and economic activity," World Development, Elsevier, vol. 136(C).
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    9. 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.
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    18. Yuping Deng & Haicheng Wang & Yanrui Wu, 2024. "Public Opinion and Chinese Exports: Evidence from Twitter Sentiment Analysis," Economics Discussion / Working Papers 24-03, The University of Western Australia, Department of Economics.
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    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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