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Openness and Inequality in Developing Countries: A New Look at the Evidence

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  • Gourdon, Julien

Abstract

Integration to world markets is expected to help developing countries to access prosperity. At the same time, increasing opportunities to trade are likely to affect income distribution and whether or not increasing openness to trade is accompanied by a reduction or an increase inequality is highly controversial. This paper brings new evidence on this issue in using a data set covering a large sample of developing countries and a model with improved controls for omitted variables and a new index of trade openness. Trade liberalization increases inequality in countries that relatively well-endowed in capital. Our model assumes that it might be fruitful to breakdown unskilled labor into non-educated and primary-educated as suggested by Wood (1994). The results show that trade liberalization increases inequality in highly educated abundant countries whereas it decreases inequality in primary educated abundant countries. However it increases inequality in non educated abundant countries, suggesting that this part of population does not benefit from trade openness since it is not included in export oriented sectors.

Suggested Citation

  • Gourdon, Julien, 2006. "Openness and Inequality in Developing Countries: A New Look at the Evidence," MPRA Paper 4176, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4176
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    Cited by:

    1. Jalil, Mohammad Muaz, 2009. "Re-examining Kuznets Hypothesis: Does Data Matter?," MPRA Paper 72557, University Library of Munich, Germany.
    2. Li, Kui-Wai, 2012. "Analyzing the Kuznets Relationship using Nonparametric and Semiparametric Methods," MPRA Paper 36535, University Library of Munich, Germany.

    More about this item

    Keywords

    International Trade; Income Distribution; Poverty;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • D3 - Microeconomics - - Distribution

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