Trade, Integration and Interregional Inequality

Georg Hirte () and Christian Lessmann

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: We study the effect of international trade and freeness of trade on interregional inequality within countries. We estimate a model derived from a structural economic geography approach where interregional inequality depends on weighted trade shares and trade costs and where we can derive an aggregate freeness of trade measure. These measures are instrumented based on constructed trade shares and trade costs tted from a gravity model of bilateral trade, which covers 208 countries for the period 1948{2006. We analyze a cross country data set of regional inequality within countries, which covers 110 countries (1569 sub-national regions) for the year 2005, and a panel data set, which covers 56 countries (835 sub-national regions) for the period 1980{2009. IV and dynamic panel regressions show that trade increases inter-regional inequality within countries but an increase in freeness of trade is probably neutral. Because the latter is an indicator for integration in the world markets, we conclude that more integration neutralizes the negative interregional distribution e ects of the increase in trade.

JEL-codes: F15 R10 R12 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-geo and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Trade, Integration, and Interregional Inequality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100610

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