Trade and regional inequality

Andrés Rodríguez-Pose

No 2010-13, Working Papers from Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales

Abstract: This paper examines the relationship between openness and within-country regional inequality across 28 countries over the period 1975-2005, paying special attention to whether increases in global trade affect the developed and developing world differently. Using a combination of static and dynamic panel data analysis, it is found that while increases in trade per se do not lead to greater territorial polarisation, in combination with certain country-specific conditions, trade has a positive and significant association with regional inequality. In particular, states with higher interregional differences in sectoral endowments, a lower share of government expenditure, and a combination of high internal transaction costs with a higher degree of coincidence between the regional income distribution and regional foreign market access positions have experienced the greatest rise in territorial inequality when exposed to greater trade flows. This means that changes in trade regimes have had a more polarising effect in low and middle income countries, whose structural features tend to potentiate the trade effect and whose levels of internal spatial inequality are, on average, significantly higher than in high income countries.

Keywords: trade; regional inequalit; low and medium income countries (search for similar items in EconPapers)
JEL-codes: F11 O18 R12 R58 (search for similar items in EconPapers)
Date: 2010-06-25
New Economics Papers: this item is included in nep-geo and nep-int
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Citations: View citations in EconPapers (6)

Published in Economic Geography 88(2), April 2012: 109-136

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Related works:
Journal Article: Trade and Regional Inequality (2012)
Working Paper: Trade and regional inequality (2011)
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