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Openness, inequality and poverty: Endowments matter

Author

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  • 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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    More about this item

    Keywords

    international trade; income distribution; poverty;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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