IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Trade and Income Inequality in Developing Countries

  • Meschi, Elena
  • Vivarelli, Marco

Summary We use a dynamic specification to estimate the impact of trade on within-country income inequality in a sample of 65 developing countries (DCs) over the 1980-99 period. Our results suggest that trade with high income countries worsen income distribution in DCs, through both imports and exports. These findings provide support to the hypothesis that technological differentials and the skill biased nature of new technologies may be important factors in shaping the distributive effects of trade. Moreover, we observe that the previous results only hold for middle-income countries (MICs); we interpret this evidence by considering the greater potential for technological upgrading in MICs.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6VC6-4TRHC95-2/2/a26d29fa02b2896a2c712779b067da3f
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal World Development.

Volume (Year): 37 (2009)
Issue (Month): 2 (February)
Pages: 287-302

as
in new window

Handle: RePEc:eee:wdevel:v:37:y:2009:i:2:p:287-302
Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Branko Milanovic & Lyn Squire, 2005. "Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence," NBER Working Papers 11046, National Bureau of Economic Research, Inc.
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  3. de Melo, Jaime & Gourdon, Julien & Maystre, Nicolas, 2006. "Openness, Inequality and Poverty: Endowments Matter," CEPR Discussion Papers 5738, C.E.P.R. Discussion Papers.
  4. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  5. Blalock, Garrick & Veloso, Francisco M., 2007. "Imports, Productivity Growth, and Supply Chain Learning," World Development, Elsevier, vol. 35(7), pages 1134-1151, July.
  6. Pinelopi K. Goldberg & Nina Pavcnik, 2001. "Trade Protection and Wages: Evidence from the Colombian Trade Reforms," NBER Working Papers 8575, National Bureau of Economic Research, Inc.
  7. Stephen Machin & John Van Reenen, 1998. "Technology And Changes In Skill Structure: Evidence From Seven Oecd Countries," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1215-1244, November.
  8. Zadia M. Feliciano, 2001. "Workers and trade liberalization: The impact of trade reforms in Mexico on wages and employment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 95-115, October.
  9. David Autor & Lawrence Katz & Alan Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," Working Papers 756, Princeton University, Department of Economics, Industrial Relations Section..
  10. Ravallion, Martin, 2001. "Growth, inequality, and poverty : looking beyond averages," Policy Research Working Paper Series 2558, The World Bank.
  11. Dani Rodrik, 1998. "Democracies Pay Higher Wages," NBER Working Papers 6364, National Bureau of Economic Research, Inc.
  12. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  13. Xavier Sala-i-Martin, 2002. "The Disturbing "Rise" of Global Income Inequality," NBER Working Papers 8904, National Bureau of Economic Research, Inc.
  14. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  15. Jerik Hanushek & Dennis Kimko, 2006. "Schooling, Labor-force Quality, and the Growth of Nations," Educational Studies, Higher School of Economics, issue 1, pages 154-193.
  16. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, vol. 79(2), pages 145-152, May.
  17. Paolo Epifani, 2002. "Trade Liberalization, Firm Performance and Labour Market Outcomes in the Developing World: What Can We Learn from Micro-LevelData?," Development Working Papers 172, Centro Studi Luca d\'Agliano, University of Milano.
  18. Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
  19. Montobbio, Fabio & Rampa, Francesco, 2005. "The impact of technology and structural change on export performance in nine developing countries," World Development, Elsevier, vol. 33(4), pages 527-547, April.
  20. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
  21. Donald Robbins, 2003. "The impact of trade liberalization upon inequality in developing countries - A review of theory and evidence-," DOCUMENTOS DE ECONOMÍA 003601, UNIVERSIDAD JAVERIANA - BOGOTÁ.
  22. Conte, Andrea & Vivarelli, Marco, 2007. "Globalization and Employment: Imported Skill Biased Technological Change in Developing Countries," IZA Discussion Papers 2797, Institute for the Study of Labor (IZA).
  23. Calderon, Cesar & Chong, Alberto, 2001. "External sector and income inequality in interdependent economies using a dynamic panel data approach," Economics Letters, Elsevier, vol. 71(2), pages 225-231, May.
  24. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages F22-F49, 02.
  25. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," Harvard Institute of Economic Research Working Papers 1769, Harvard - Institute of Economic Research.
  26. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  27. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  28. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  29. Orazio Attanasio & Pinelopi Goldberg & Nina Pavcnik, 2003. "Trade Reforms and Wage Inequiality in Colombia," NBER Working Papers 9830, National Bureau of Economic Research, Inc.
  30. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  31. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages F73-F96, 02.
  32. Barba Navaretti, Giorgio & Soloaga, Isidro, 2002. "Weightless Machines and Costless Knowledge: An Empirical Analysis of Trade and Technology Diffusion," CEPR Discussion Papers 3321, C.E.P.R. Discussion Papers.
  33. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
  34. Epifani Paolo, 2003. "Trade liberalization, Firm Performances and Labor Market Outcomes in the Developing World, what Can We Learn From Micro-Level Data?," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 455-486.
  35. Berman, Eli & Machin, Stephen, 2000. "Skill-Based Technology Transfer around the World," Oxford Review of Economic Policy, Oxford University Press, vol. 16(3), pages 12-22, Autumn.
  36. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
  37. Bruno, Giovanni S.F., 2005. "Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 87(3), pages 361-366, June.
  38. Gordon H. Hanson & Ann Harrison, 1999. "Trade Liberalization and Wage Inequality in Mexico," ILR Review, Cornell University, ILR School, vol. 52(2), pages 271-288, January.
  39. Xu, Bin, 2003. "Trade liberalization, wage inequality, and endogenously determined nontraded goods," Journal of International Economics, Elsevier, vol. 60(2), pages 417-431, August.
  40. Bensidoun, Isabelle & Jean, Sébastien & Sztulman, Aude, 2011. "International trade and income distribution : reconsidering the evidence," Economics Papers from University Paris Dauphine 123456789/4212, Paris Dauphine University.
  41. Cornia, Giovanni Andrea & Kiiski, Sampsa, 2001. "Trends in Income Distribution in the Post-World War II Period Evidence and Interpretation," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  42. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
  43. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
  44. Easterly, William, 2001. "The effect of International Monetary Fund and World Bank programs on poverty," Policy Research Working Paper Series 2517, The World Bank.
  45. Chamarbagwala, Rubiana, 2006. "Economic Liberalization and Wage Inequality in India," World Development, Elsevier, vol. 34(12), pages 1997-2015, December.
  46. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
  47. Robbins, Donald J, 2003. "The impact of trade liberalization upon inequality in developing countries : a review of theory and evidence," ILO Working Papers 365055, International Labour Organization.
  48. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
  49. Zhu, Susan Chun & Trefler, Daniel, 2005. "Trade and inequality in developing countries: a general equilibrium analysis," Journal of International Economics, Elsevier, vol. 65(1), pages 21-48, January.
  50. Robbins, Donald & Gindling, T H, 1999. "Trade Liberalization and the Relative Wages for More-Skilled Workers in Costa Rica," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 140-54, June.
  51. Wood, Adrian & Ridao-Cano, Cristobal, 1999. "Skill, Trade, and International Inequality," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 89-119, January.
  52. Edwards, Sebastian, 1997. "Trade Policy, Growth, and Income Distribution," American Economic Review, American Economic Association, vol. 87(2), pages 205-10, May.
  53. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
  54. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  55. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-66, April.
  56. Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-23, May.
  57. Bourguignon, F. & Morrisson, C., 1989. "Income Distribution, Development and Foreign Trade: A Cross-Sectional Analysis," DELTA Working Papers 89-05, DELTA (Ecole normale supérieure).
  58. Fajnzylber, Pablo & Fernandes,Ana Margarida, 2004. "International economic activities and the demand for skilled labor: evidence from Brazil and China," Policy Research Working Paper Series 3426, The World Bank.
  59. Alvarez, Roberto, 2007. "Explaining Export Success: Firm Characteristics and Spillover Effects," World Development, Elsevier, vol. 35(3), pages 377-393, March.
  60. Grimalda, Gianluca & Vivarelli, Marco, 2004. "One or Many Kuznets Curves? Short and Long Run Effects of the Impact of Skill-Biased Technological Change on Income Inequality," IZA Discussion Papers 1223, Institute for the Study of Labor (IZA).
  61. Leamer, Edward E. & Maul, Hugo & Rodriguez, Sergio & Schott, Peter K., 1999. "Does natural resource abundance increase Latin American income inequality?," Journal of Development Economics, Elsevier, vol. 59(1), pages 3-42, June.
  62. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  63. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:37:y:2009:i:2:p:287-302. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.