Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245384 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9203
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), 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.
Subjects: 
trade openness
globalization
income inequality
instrumental variable estimation
panel econometrics
development levels
transition economies
JEL: 
C26
D31
D63
F02
F60
H11
H20
Document Type: 
Working Paper
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