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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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    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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