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International Trade and Income Distribution: Reconsidering the Evidence

  • Isabelle Bensidoun
  • Sébastien Jean
  • Aude Sztulman

This article reassesses the link between international trade and income distribution. We argue that one way to assess the influence of international trade upon income distribution is to take account of each country’s specific trade patterns by measuring the changes in the factor content of trade. The econometric specification is based on changes in Gini indices (over non-overlapping 4-year intervals), computed exclusively from series drawn from the same source. Our results show that a change in the factor content of trade has a significant impact on income distribution. The sign and magnitude of this impact is conditional on the national income level. We find that an increase in the labor content of trade raises income inequality in poor countries, but reduces it in rich countries (the reverse is true for the capital content of trade). In particular, we show that in the 1980s and 1990s, international trade may have contributed significantly to widening income inequalities in developing countries.

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Paper provided by CEPII research center in its series Working Papers with number 2005-17.

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Date of creation: Oct 2005
Date of revision:
Handle: RePEc:cii:cepidt:2005-17
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  1. Jonathan Eaton, 1984. "A Dynamic Specific-Factors Model of International Trade," NBER Working Papers 1479, National Bureau of Economic Research, Inc.
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