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Openness, inequality and poverty: Endowments matter

Author

Listed:
  • Julien Gourdon
  • Nicolas Maystre
  • Jaime de Melo

Abstract

Using tariffs as a measure of openness, this paper finds consistent evidence that the conditional effects of trade liberalization on inequality are correlated with relative factor endowments. Trade liberalization, measured by changes in tariff revenues, is associated with increases in inequality in countries well-endowed with highly skilled workers and capital or with workers that have very low education levels. Similar, although less robust, results are also obtained when decile data are used instead of the usual Gini coefficients. Taken together, the results are strongly supportive of the factor-proportions theory of trade and suggest that trade liberalization in poor countries where the share of the labor force with little education is high raises inequality. Simulation results also suggest that relatively small changes in inequality as measured by aggregate measures of inequality, like the Gini coefficient, are magnified when estimates are carried out using decile data.

Suggested Citation

  • Julien Gourdon & Nicolas Maystre & Jaime de Melo, 2008. "Openness, inequality and poverty: Endowments matter," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(3), pages 343-378.
  • Handle: RePEc:taf:jitecd:v:17:y:2008:i:3:p:343-378
    DOI: 10.1080/09638190802136978
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    Citations

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    Cited by:

    1. Meschi, Elena & Vivarelli, Marco, 2007. "Globalization and Income Inequality," IZA Discussion Papers 2958, Institute for the Study of Labor (IZA).
    2. Sylvain Chabe-Ferret & Julien Gourdon & Mohamed Ali Marouani & Tancrède Voituriez, 2007. "Trade-Induced Changes in Economic Inequality: Assessment Issues and Policy Implications for Developing Countries," Working Papers DT/2007/11, DIAL (Développement, Institutions et Mondialisation).
    3. Oloufade, Djoulassi K., 2012. "Trade Openness, Conflict Risk and Income Inequality," MPRA Paper 40702, University Library of Munich, Germany, revised Feb 2013.
    4. Kaldewei, Cornelia & Weller, Jürgen, 2013. "Empleo, crecimiento sostenible e igualdad," Macroeconomía del Desarrollo 145, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    5. Gourdon, Julien, 2006. "Openness and Inequality in Developing Countries: A New Look at the Evidence," MPRA Paper 4176, University Library of Munich, Germany.
    6. Isabelle Bensidoun & Sébastien Jean & Aude Sztulman, 2011. "International trade and income distribution: reconsidering the evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(4), pages 593-619, November.
    7. Meschi, Elena & Vivarelli, Marco, 2009. "Trade and Income Inequality in Developing Countries," World Development, Elsevier, vol. 37(2), pages 287-302, February.
    8. repec:eee:tefoso:v:127:y:2018:i:c:p:271-280 is not listed on IDEAS
    9. Malvika Mahesh, 2016. "The effects of trade openness on income inequality - evidence from BRIC countries," Economics Bulletin, AccessEcon, vol. 36(3), pages 1751-1761.
    10. G. C. Lim & Paul D. McNelis, 2014. "Income Inequality, Trade and Financial Openness," Melbourne Institute Working Paper Series wp2014n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    11. Caroline DAYMON, 2012. "Ouverture Commerciale, Inégalités De Revenu Et Répartition Salariale Dans Les Pays Du Sud Et De L’Est De La Méditerranée," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 35, pages 81-98.
    12. Bergh, Andreas & Nilsson, Therese, 2010. "Do liberalization and globalization increase income inequality?," European Journal of Political Economy, Elsevier, vol. 26(4), pages 488-505, December.
    13. repec:ers:journl:v:xx:y:2017:i:3a:p:35-50 is not listed on IDEAS
    14. Xiaodong Lu & Guowei Cai, 2011. "Effective factor endowments, trade openness and income distribution in China," Frontiers of Economics in China, Springer;Higher Education Press, vol. 6(2), pages 188-210, June.
    15. Cassette, Aurélie & Fleury, Nicolas & Petit, Sylvain, 2012. "Income Inequalities and International Trade in Goods and Services: Short- and Long-Run Evidence," MPRA Paper 75205, University Library of Munich, Germany.
    16. Lim, G.C. & McNelis, Paul D., 2016. "Income growth and inequality: The threshold effects of trade and financial openness," Economic Modelling, Elsevier, vol. 58(C), pages 403-412.
    17. repec:ers:journl:v:xx:y:2017:i:3b:p:27-37 is not listed on IDEAS

    More about this item

    Keywords

    international trade; income distribution; poverty;

    JEL classification:

    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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