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Timing of trade liberalization

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  • Ryuichi Tanaka

Abstract

This paper studies the effects of trade liberalization on growth and long-run global income inequality using a two-country model of human capital accumulation by credit-constrained households. I show that the timing of trade liberalization is a crucial determinant of its effects on growth. Moreover, I show that the size of the long-run income gap between the two countries depends on the difference in domestic income inequality when they open up to trade. Based on these results, I analyze the effects of redistributive policy within a country. I show that redistribution in one country may increase income per capita of its trading partner if it is undertaken in a steady state, while the opposite is true if the policy is undertaken during transition.

Suggested Citation

  • Ryuichi Tanaka, 2007. "Timing of trade liberalization," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(4), pages 447-473.
  • Handle: RePEc:taf:jitecd:v:16:y:2007:i:4:p:447-473
    DOI: 10.1080/09638190701600207
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    Cited by:

    1. Debraj Ray, 2006. "On the dynamics of inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(2), pages 291-306, October.
    2. Ortega, Francesc & Tanaka, Ryuichi, 2015. "Immigration and the Political Economy of Public Education: Recent Perspectives," IZA Discussion Papers 8778, Institute for the Study of Labor (IZA).

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