Openness, Inequality and Poverty: Endowments Matter

Centro Studi Luca d'Agliano Development Studies Working Paper No. 239

49 Pages Posted: 29 Jun 2009 Last revised: 27 Apr 2012

See all articles by Jaime de Melo

Jaime de Melo

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR); World Bank

Julien Gourdon

OECD

Nicolas Maystre

UNCTAD - United Nations Conference on Trade and Development; Department of Economics - University of Geneva

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2008

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 in highly skilled workers and capital or with workers that have very low education levels. Similar, though 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: International Trade, Income Distribution, Poverty

JEL Classification: F11, F16, D3

Suggested Citation

de Melo, Jaime and Gourdon, Julien and Maystre, Nicolas, Openness, Inequality and Poverty: Endowments Matter (January 1, 2008). Centro Studi Luca d'Agliano Development Studies Working Paper No. 239, Available at SSRN: https://ssrn.com/abstract=1313756 or http://dx.doi.org/10.2139/ssrn.1313756

Jaime De Melo (Contact Author)

University of Geneva - Department of Political Economics ( email )

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Geneva 4, CH-1211
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+41 22 705 8273 (Phone)
+41 22 705 8293 (Fax)

HOME PAGE: http://www.unige.ch/ses/ecopo/demelo/Jaime.html

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

World Bank ( email )

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Washington, DC 20433
United States

Julien Gourdon

OECD ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Nicolas Maystre

UNCTAD - United Nations Conference on Trade and Development ( email )

Palais des Nations
Room: E 10028
Geneva, 1211
Switzerland
+41229171848 (Phone)

Department of Economics - University of Geneva ( email )

40, boulevard du Pont-d'Arve
Geneva 4, CH-1211
Switzerland

HOME PAGE: http://www.unige.ch/ses/dsec/staff/faculty/Maystre-Nicolas.html

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