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Intra-regional trade and income inequality: Where do we stand?

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  • Thi Hong Hanh Pham

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - UN - Université de Nantes)

Abstract

This paper assesses the link between intra-regional trade and within income inequality. To do so, we use a data sample of nineteen countries in the Asia-Pacific region - one of the most dynamic economic regions. Differing from the existing empirical literature, we employ the gravity model to explain income inequality in function of bilateral trade variables. We find that intra-regional exports can narrow within-country income inequalities, while the opposite tends to be true for intra-regional imports. Moreover, the creation effect of exports on income inequality seems to be dominated by the diversion effect of imports. Our finding also supports the hump-shaped relationship between per capita GDP and within-country income inequality described by the Kuznets curve.

Suggested Citation

  • Thi Hong Hanh Pham, 2014. "Intra-regional trade and income inequality: Where do we stand?," Working Papers hal-01087366, HAL.
  • Handle: RePEc:hal:wpaper:hal-01087366
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01087366
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    References listed on IDEAS

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    1. Cooper, Richard, 2001. "Growth and Inequality: The Role of Foreign Trade and Investment," Scholarly Articles 3677049, Harvard University Department of Economics.
    2. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    3. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    4. Basu, Parantap & Guariglia, Alessandra, 2007. "Foreign Direct Investment, inequality, and growth," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 824-839, December.
    5. Bourguignon, F. & Morrisson, C., 1990. "Income distribution, development and foreign trade : A cross-sectional analysis," European Economic Review, Elsevier, vol. 34(6), pages 1113-1132, September.
    6. repec:dau:papers:123456789/4212 is not listed on IDEAS
    7. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    8. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," Harvard Institute of Economic Research Working Papers 1769, Harvard - Institute of Economic Research.
    9. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    10. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
    11. 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.
    12. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, February.
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    Keywords

    Income inequality; Intra-regional trade; Gravity; Asia-Pacific.;

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