Openness, Inequality and Poverty: Endowments Matter

Julien Gourdon, Nicolas Maystre and Jaime de Melo

Chapter 20 in Developing Countries in the World Economy, 2015, pp 497-532 from World Scientific Publishing Co. Pte. Ltd.

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, measured by changes in tariff revenues, is associated with increases in inequality in countries well-endowed with highly skilled workers and capital or with workers that have very low education levels. Similar, although less robust, results are also obtained when decile data are used instead of the usual Gini coefficients. Taken together, 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. 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: Trade Barriers and Market Structure; Quantitative Restrictions; Political Economy and Migration; Trade and the Environment (search for similar items in EconPapers)
Date: 2015
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Related works:
Working Paper: Openness, Inequality, and Poverty: Endowments Matter (2011)
Working Paper: Openness, Inequality, and Poverty: Endowments Matter (2011)
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Working Paper: Openness, Inequality, and Poverty: Endowments Matter (2007)
Working Paper: Openness, Inequality and Poverty: Endowments Matter (2006)
Working Paper: Openness, inequality, and poverty: endowments matter (2006)
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