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The impact of exports on income inequality in developing countries

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  • Hazama, Yasushi

Abstract

Trade exhibits two contrasting effects on income inequality in developing countries (DCs). On the one hand, trade openness benefits unskilled labor in preference to skilled labor and capital (the Stolper–Samuelson effect). On the other hand, trade openness increases the demand for skilled (rather than unskilled) labor inputs (the skill premium effect). Recent studies that provide stronger support for the skill premium model have focused on wage inequality or have chosen higher-income DCs. We test the effect of export growth on income inequality for 70 lower income DCs and 36 higher-income DCs, using an unbalanced panel dataset for the 1971–2012 period. The results show that the export/GDP ratio has a negative effect on income inequality for lower-income DCs, but no significant effect was found for higher-income DCs.

Suggested Citation

  • Hazama, Yasushi, 2017. "The impact of exports on income inequality in developing countries," IDE Discussion Papers 650, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper650
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    References listed on IDEAS

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    1. Ann Harrison & John McLaren & Margaret McMillan, 2011. "Recent Perspectives on Trade and Inequality," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 261-289, September.
    2. Henry Tam, 2008. "An economic or political Kuznets curve?," Public Choice, Springer, vol. 134(3), pages 367-389, March.
    3. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
    4. L. ALAN WINTERS & NEIL McCULLOCH & ANDREW McKAY, 2015. "Trade Liberalization and Poverty: The Evidence So Far," World Scientific Book Chapters,in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 14, pages 271-314 World Scientific Publishing Co. Pte. Ltd..
    5. John Duffy & Chris Papageorgiou & Fidel Perez-Sebastian, 2004. "Capital-Skill Complementarity? Evidence from a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 327-344, February.
    6. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, December.
    7. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    8. Dong, Fang, 2014. "The impact of economic openness on standard of living and income inequality in eight countries," Emerging Markets Review, Elsevier, vol. 21(C), pages 234-264.
    9. Chiara Franco & Elisa Gerussi, 2013. "Trade, foreign direct investments (FDI) and income inequality: Empirical evidence from transition countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(8), pages 1131-1160, December.
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    12. repec:spr:spbrec:978-981-10-0257-1 is not listed on IDEAS
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    More about this item

    Keywords

    Exports; Income; International trade; Labor market; Human resources; Income inequality; Skill premium; Stolper–Samuelson theorem;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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