International trade, geographic heterogeneity and interregional inequality
Georg Hirte (),
Christian Lessmann and
European Economic Review, 2020, vol. 127, issue C
We study the effect of international trade on interregional income inequality from 1992 to 2012 in the majority of countries worldwide using satellite night-light-based inequality proxies. For our analysis, we develop novel indicators for within-country heterogeneity in trade costs that are based on exogenous geographical features. In order to deal with potential endogeneity issues, we apply a gravity-style instrument that utilizes the occurrence of large natural disasters striking trade partners, as well as a Bartik-style instrument. In contrast to previous studies, our IV estimates reveal that international trade aggravates economic disparities only in those countries that have a higher within-country heterogeneity in terms of their access to the world market and their within-country trade costs.
Keywords: Interregional inequality; Spatial inequality trade; Trade costs; Heterogeneous geography; Gravity model; Panel data (search for similar items in EconPapers)
JEL-codes: F14 R12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:127:y:2020:i:c:s0014292120300593
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