IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Endogenous Liberalization and Within-Country Inequality: A Theoretical and Empirical Analysis

We theoretically model and empirically investigate a society’s liberalization decision and its impact on income inequality. The motivation is that a blanket conclusion that globalization increases inequality within countries can be misleading. In the paper, the decision of the society rests on the pre- and post-liberalization utilities of different segments, and, complying with stylized facts, the economy’s structure follows Kuznets’ predictions on industrialization and urbanization. Our findings support the line of research which emphasizes the importance of country-specific factors in prescribing policies. In particular, countries are more likely to open up when relative productivity of migrant ex-rural workers to those of initial urban workers in manufacturing, β, is high, and the society’s tastes for the agricultural goods, α, are not particularly strong. Following liberalization, the income distribution too improves if α is low and β is high. Empirical results show that open economies, ceteris paribus, have 3- 4 higher Gini points than closed economies. In developing countries except Sub-saharan Africa, β can offset this stand-alone effect just after the switch if the switch is made with a minimum β value of 0.67 – 0.89, while in Sub-saharan Africa, this standalone effect can be offset in 10-15 years after the switch. Overall, however, the β effect cannot surpass the stand-alone effect in the whole sample, which implies that the median country has made a “wrong” switch.

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:
Download Restriction: no

Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2005_18.

in new window

Length: 57 pages
Date of creation: 17 Oct 2005
Handle: RePEc:dkn:econwp:eco_2005_18
Contact details of provider: Postal:
221 Burwood Highway, Burwood 3125

Phone: 61 3 9244 3815
Fax: +61 3 5227 2655
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

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:dkn:econwp:eco_2005_18. 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: (Dr Xueli Tang)

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.