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Openness and Income Dispaities: Does Trade Explain the 'Mezzogiorno' Effect?

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Abstract

Many theoretical models show that trade openness has positive welfare implications. Yet, openness might affect different social groups and regions asymmetrically, even within a given country. We use Italian regional data to answer the question whether trade openness affects within-country income differentials. In Italy, the more affluent regions are internationally more open than poorer ones not only with respect to trade in goods, but also with respect to FDI and international migration. Prima facie, there is a positive correlation between openness and per capita income. Studying this relationship empirically requires taking into account the endogenous component of openness. We apply panel cointegration and instrumental variables techniques to account for the endogeneity of trade. Our results show a positive link between trade openness and the level of income per capita.

Suggested Citation

  • Claudia M. Buch & Paola Monti, 2008. "Openness and Income Dispaities: Does Trade Explain the 'Mezzogiorno' Effect?," IAW Discussion Papers 41, Institut für Angewandte Wirtschaftsforschung (IAW).
  • Handle: RePEc:iaw:iawdip:41
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    Cited by:

    1. Stanislav Cernosa, 2011. "Openness to Trade, Migration and Foreign Direct Investments of the EU," WIFO Working Papers 401, WIFO.
    2. Handler, Heinz, 2013. "The eurozone: piecemeal approach to an optimum currency area," MPRA Paper 67183, University Library of Munich, Germany.
    3. repec:eee:jcecon:v:46:y:2018:i:1:p:308-325 is not listed on IDEAS

    More about this item

    Keywords

    Openness; growth; regional income disparities; Italian regions;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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