The Effect of Trade Openness on Income Inequality with the Role of Institutional Quality
DOI:
https://doi.org/10.31258/ijesh.1.2.65-76Keywords:
Trade openness, income inequality, institutional quality, system GMMAbstract
This study investigates the effect of trade openness on income inequality using the panel system generalised method of moments (GMM). The sample countries consist of 65 developed and developing countries and the time period covers from 1984 to 2012. This study also provides new evidence that sheds light on the role of institutional quality in influencing the effectof trade openness on income inequality. The empirical results reveal that trade openness tends to increase income inequality. In addition, the marginal effect also revealed that institutional quality has a corrective effect on the trade openness – income inequality nexus.
Downloads
References
Ackah, C. (2007). Trade reforms, human capital and poverty: A Pseudo-panel analysis for Ghana. Centre for Research in Economic Development and International Trade, School of Economics, University of Nottingham.
Agenor, P. R. (2004). Does globalisation hurt the poor? International Economics and Economic Policy. 1(1), 21-51.
Aradhyula, S., Rahman, T., & Seenivasan, K. (2007). “Impact of international trade on income and income inequality”, paper presented at American Agricultural Economics Association Annual Meeting, Portland.
Arrellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58, 277-297.
Arellano, M., & Bover, M. (1995). Another look at the instrumental variable estimation of error components models. Journal of Econometrics, 68, 29-51.
Barro, R. J. (1991). Economic growth in a cross-section of countries. Quarterly Journal of Economics, 106, 407-443.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data model. Journal of Econometrics, 87, 115-143.
Afonso, O., & Gil, P, M. (2013). Effects of north-south trade on wage inequality and on human capital accumulation. Economic Modelling, 35, 481-492.
Borras, Jr., S., M. (2007) ‘Free market’, export-led development strategy and its impact on rural livelihoods, poverty and inequality: The Philippine experience seen from a Southeast Asian perspective. Review of International Political Economy, 14(1), 143-175.
Brambor, T., Clark, W., R. & Golder, M. (2006). Understanding interaction models: Improving empirical analyses. Political Analysis, 14, 63-82.
Bowsher (2002)
Carneiro, F. G., & Arbache, J. S. (2003). Assessing the impacts of trade on poverty and inequality. Applied Economics Letters, 10(15), 989-994.
Chong, A., & Gradstein, M. (2007). Inequality and institutions. The Review of Economics and Statistics, 89 (3), 454-465.
Cysne, R. P., Maldonado, W. L., & Monteiro, P. K. (2005). Inflation and income inequality: A shopping-time approach. Journal of Development Economics. 78(2), 516-528.
Kutlina-Dimitrova, Z., & Lakatos, C. (2014). Assessing the economic impacts of EU-Singapore FTA with a dynamic general equilibrium model. International Economics and Economy Policy. 11(3). 277-291.
Dollar, D., & Kraay, A. (2004). Trade, growth and poverty. The Economic Journal, 114, 22-49.
Dutt, A. K., & Mukhopadhyay, K. (2005). Globalisation and the inequality among nations: A VAR approach. Economics Letters, 88(3), 295-299.
Fields, G. S. (1980). Education and income distribution in developing countries: A review of the literature. The World Bank, 231-315.
Glewwe, P.(1988). Economic liberalisation and income inequality. Journal of Development Economics, 28, 233-246.
Greenstone, M., Looney, A., Patashnik, J., & Yu, M. (2013). Thirteen economic facts about social mobility and the role of education. The Hamilton Project.
Hudson, D., & Namini, S. S. (2015). Inflation and income inequality in developed and developing countries. Conference Paper Published by ResearchGate https://www.researchgate.net/publication/301489978.
Knack, S., & Keefer, P. (1995). Institutions and economic performance: Cross-country tests using alternative institutional measures. Economic and Politics, 7, 207-27.
Li, H., & Zou, H. F. (2002). Inflation, growth and income distribution: A cross country study. Annals of Economics and Finance, 3, 85-101.
Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3–42.
Mah, J., S. (2003). A note on globalisation and income distribution--The case of Korea, 1975-1995. Journal of Asian Economics, 14(1), 157-164.
Mah, J., S. (2013). Globalisation, decentralisation and income inequality: The case of China. Economic Modelling, 31, 653-658.
Meschi, E., & Vivarelli, M. (2009). Trade and income inequality in developing countries. Journal of World Development, 37, No.2, 287-302.
Mohammad, S. (1981). Trade, growth and income redistribution. Journal of Development Economics, 9, 131-147.
Muarer, M. R., & Yesin, P. A. (2004). Income inequality and inflation.Working paper for the conference in Luca.
North, D, C. (1991). Institutions. Journal of Economic Perspectives, 5, 97-112.
Ravallion, M., & Jayasuriya, S. (1988). Liberalisation and inequality in Sri Lanka. Journal of Development Economics, 28, 247-255.
Roses, J. R., Galarraga, J. M., & Torado, D. A. (2010). The upswing of regional income inequality in Spain (1860-1930). Explorations in Economic History, 47(2), 244-257.
Savvides, A. (1998). Trade policy and income inequality: New evidence. Economic Letters, 61(3), 365-372.
Simoes, M.C.N., Andrade, J.A.S., & Duarte, A.P.S. (2013). A regional perspective on inequality and growth in Portugal using panel cointegration analysis. International Economics and Economy Policy. 10(3), 427-451.
Stolper, W. F., & Samuelson, P. A. (1941). Protective and real wages. The review of Economies Studies, 9(1), 58-73.
Thalassinos, E., Ugurlu, E., & Muratoglu, Y. (2012). Income inequality and inflation in the EU. European Research Studies. XV(1), 127-140.
UNCTAD. (1994). The outcome of the Uruguay round: An initial assessment. United Nations Conference on Trade and Development, Trade and Development Report, Geneva, Switzerland.
UNCTAD. (2012). Trade, income distribution and poverty in developing countries: A survey. United Nations Conference on Trade and Development, Trade and Development Report, Geneva, Switzerland.
UNDP. (1999). Globalization with a human face. Human Development Report. New York: Oxford University Press.
Vandenbussche, H., & Konings, J. (1998).Globalisation and the effects of national versus international competition on the labour market: Theory and evidence from Belgian firm-level data. The World Economy, 21(8), 1151-1177.r
Wade, R. H. (2004). Is globalisation reducing poverty and inequality? World Development, 32(4), 567-589.
Windmeijer, F. (2005). A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics, 126(1), 25-51.
WTO. (2007). Trade liberalisation and development – WTO and the Doha Round. World Trade Organisation (WTO), Geneva, Switzerland.
Downloads
Published
How to Cite
Issue
Section
License
Author(s) retain the copyright of articles published in this journal, with first publication rights granted to Indonesian Journal of Economics, Social, and Humanities. All journal content is licenced under Creative Commons Attribution 4.0 International License. This license permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
