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Trade, Integration and Interregional Inequality

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  • Hirte, Georg
  • Leßmann, Christian

Abstract

We study the effect of international trade and freeness of trade on interregional inequality within countries. We estimate a model derived from a structural economic geography approach where interregional inequality depends on weighted trade shares and trade costs and where we can derive an aggregate freeness of trade measure. These measures are instrumented based on constructed trade shares and trade costs tted from a gravity model of bilateral trade, which covers 208 countries for the period 1948{2006. We analyze a cross country data set of regional inequality within countries, which covers 110 countries (1569 sub-national regions) for the year 2005, and a panel data set, which covers 56 countries (835 sub-national regions) for the period 1980{2009. IV and dynamic panel regressions show that trade increases inter-regional inequality within countries but an increase in freeness of trade is probably neutral. Because the latter is an indicator for integration in the world markets, we conclude that more integration neutralizes the negative interregional distribution e ects of the increase in trade.

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  • Hirte, Georg & Leßmann, Christian, 2014. "Trade, Integration and Interregional Inequality," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100610, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc14:100610
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    Cited by:

    1. Lessmann, Christian & Seidel, André, 2017. "Regional inequality, convergence, and its determinants – A view from outer space," European Economic Review, Elsevier, vol. 92(C), pages 110-132.

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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