Income inequality of destination countries and trade patterns: Evidence from Chinese firm-level data

Zhuang Miao, Yifan Li and Sisong Duan

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we investigate the relation between the export patterns and the income inequality of the destination countries using the Chinese firm-level data. Our empirical analysis finds two main results: (i) export price decreases in the income inequality of the destination countries; while (ii) the exporting firm number and export value will increase in the inequality level. With a conventionally theoretical framework, we discuss the potential influencing mechanism. A higher income inequality leads to higher share of poor consumers in a country, which will lower the quality threshold for Chinese exporters. In this case, the firms with less competitive and producing low quality products are able to enter this market. As a result, we observe that in response to a higher income inequality, more firms enter the market while the exporting price decreases in this market.

Keywords: Income Inequality; Trade Patterns; Chinese Firm-level Data (search for similar items in EconPapers)
JEL-codes: F12 F14 L11 (search for similar items in EconPapers)
Date: 2020-04-01
New Economics Papers: this item is included in nep-int and nep-tra
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