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International Trade and Per Capita Income Convergence: A Difference-in-Differences Analysis

  • Matthew J. Slaughter
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    In this paper I analyze whether international trade contributes to per capita income convergence across countries. The analysis focuses on four important post-1945 multilateral trade liberalizations. To identify trade's effect on income dispersion, in each case I use a difference-in-differences' approach which compares the convergence pattern among the liberalizing countries before and after liberalization with the convergence pattern among randomly chosen control countries before and after liberalization. My main empirical result is that trade liberalization did not trigger convergence in any of the four cases. If anything, trade seems to have caused income divergence.

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    File URL: http://www.nber.org/papers/w6557.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6557.

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    Date of creation: May 1998
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    Publication status: published as Slaughter, Matthew J. "Trade Liberalization And Per Capita Income Convergence: A Difference-In-Differences Analysis," Journal of International Economics, 2001, v55(1,Oct), 203-228.
    Handle: RePEc:nbr:nberwo:6557
    Note: ITI
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    1. David T. Coe & Elhanan Helpman & Alexander Hoffmaister, 1995. "North-South R&D Spillovers," NBER Working Papers 5048, National Bureau of Economic Research, Inc.
    2. Matthew J. Slaughter, 1997. "Per Capita Income Convergence and the Role of International Trade," NBER Working Papers 5897, National Bureau of Economic Research, Inc.
    3. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    4. Ben-David, Dan, 1995. "Trade and Convergence Among Countries," CEPR Discussion Papers 1126, C.E.P.R. Discussion Papers.
    5. Deardorff, Alan V., 1986. "Firless firwoes: How preferences can interfere with the theorems of international trade," Journal of International Economics, Elsevier, vol. 20(1-2), pages 131-142, February.
    6. Coe, David T & Helpman, Elhanan, 1993. "International R&D Spillovers," CEPR Discussion Papers 840, C.E.P.R. Discussion Papers.
    7. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 653-79, August.
    8. Eaton, J. & Kortum, S., 1995. "Trade in Ideas: Patenting and Productivity onn the OECD," Papers 34, Boston University - Department of Economics.
    9. Slaughter, Matthew J, 1997. "Per Capita Income Convergence and the Role of International Trade," American Economic Review, American Economic Association, vol. 87(2), pages 194-99, May.
    10. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc.
    11. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
    12. Leamer, E.E., 1995. "The Heckscher-Ohlin Model in Theory and Practice," Princeton Studies in International Economics 77, International Economics Section, Departement of Economics Princeton University,.
    13. Baldwin, Richard, 1990. "Measurable Dynamic Gains from Trade," Working Paper Series 270, Research Institute of Industrial Economics.
    14. Matsuyama, Kiminori, 1996. "Why Are There Rich and Poor Countries? Symmetry-Breaking in the World Economy," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 419-439, December.
    15. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236 Elsevier.
    16. Matthew J. Slaughter, 1995. "The Antebellum Transportation Revolution and Factor-Price Convergence," NBER Working Papers 5303, National Bureau of Economic Research, Inc.
    17. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-66, April.
    18. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-38, December.
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