Trade Openness and Income Inequality: New Empirical Evidence

Florian Dorn, Clemens Fuest and Niklas Potrafke

No 359, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: We examine how trade openness influences income inequality within countries. The sample includes 139 countries over the period 1970–2014. We employ predicted openness as instrument to deal with the endogeneity of trade openness. The effect of trade openness on income inequality differs across countries. Trade openness tends to disproportionately benefit the relative income shares of the very poor, but not necessarily all poor, in emerging and developing economies. In most advanced economies, trade openness increased income inequality, an effect that is driven by outliers. Our results suggest a strong effect of trade openness on inequality in China and transition countries.

Keywords: Trade openness; globalization; income inequality; instrumental variable estimation; panel econometrics; development levels; transition economies (search for similar items in EconPapers)
JEL-codes: C26 D31 D63 F02 F60 H11 H20 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Trade openness and income inequality: New empirical evidence (2022)
Working Paper: Trade Openness and Income Inequality: New Empirical Evidence (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ifowps:_359

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