Openness, Inequality and Poverty: Endowments Matter

Jaime de Melo, Julien Gourdon and Nicolas Maystre

No 5738, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using tariffs as a measure of openness, this paper finds consistent evidence that the conditional effects of trade liberalization on inequality are correlated with relative factor endowments. Trade liberalization is associated with increases in inequality in countries well-endowed in highly skilled workers and capital or with workers that have very low education levels, and in countries relatively well-endowed in mining and fuels while it is associated with decreases in inequality in countries that are wellendowed with primary-educated labor. Similar results are also apparent when decile data are used instead of the usual Gini coefficient. The results are strongly supportive of the factor-proportions theory of trade and suggest that trade liberalization in poor countries where the share of the labor force with little education is high raises inequality, although in our sample relative endowments in capital turn out to be the overriding determinant so that trade liberalization is accompanied by reduced income inequality in low-income countries. Simulation results also suggest that relatively small changes in inequality as measured by aggregate measures of inequality like the Gini coefficient are magnified when estimates are carried out using decile data.

Keywords: International trade; Income distribution; Poverty (search for similar items in EconPapers)
JEL-codes: D3 F11 F16 (search for similar items in EconPapers)
Date: 2006-07
New Economics Papers: this item is included in nep-dev, nep-int and nep-ltv
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Citations: View citations in EconPapers (14)

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Related works:
Chapter: Openness, Inequality and Poverty: Endowments Matter (2015)
Working Paper: Openness, Inequality, and Poverty: Endowments Matter (2011)
Working Paper: Openness, Inequality, and Poverty: Endowments Matter (2011)
Journal Article: Openness, inequality and poverty: Endowments matter (2008)
Working Paper: Opennes, Inequality, and Poverty: Endowments Matter (2008)
Working Paper: Openness, Inequality and Poverty: Endowment Matter? (2008)
Working Paper: Openness, Inequality, and Poverty: Endowments Matter (2007)
Working Paper: Openness, inequality, and poverty: endowments matter (2006)
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