Economics at your fingertips  

Income growth and inequality: The threshold effects of trade and financial openness

Guay Lim () and Paul McNelis ()

Economic Modelling, 2016, vol. 58, issue C, 403-412

Abstract: Empirical studies about whether trade and financial openness lead to favourable Gini outcomes yield mixed results and theoretical work suggest that the effects likely depend on the stage of economic development and the nature of the production structure. This paper proposes a model of a small open economy with two key components – a component with heterogeneous agents earning a range of incomes and a component with traded and non-traded goods and associated financial linkages. Simulations show that both trade and financial openness can lead to improvements in both income growth and equality once an economy crosses a critical threshold in capital intensity and in the use of imported intermediate goods in the production process.

Keywords: Gini coefficient; Openness; Heterogeneous agents (search for similar items in EconPapers)
JEL-codes: E10 F41 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-08-11
Handle: RePEc:eee:ecmode:v:58:y:2016:i:c:p:403-412