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The effects of preferential trade agreements on income inequality

Forsström, Aline LU and Spjut, Beatrice (2025) NEKH03 20242
Department of Economics
Abstract (Swedish)
The 1980’s and 1990’s was a time for increased global trade liberalisation, when more countries started to join preferential trade agreements with other states. At the same time, income inequality increased in some parts of the world. The role of trade in increasing income inequality has been debated by previous research, and has not been able to come to a conclusive answer. A central question is if there are ambiguous effects for different countries. This thesis aims to understand the relationship between preferential trade agreements and income inequality. By employing econometric tools and methods, we will try to analyse how the Gini coefficient is affected by countries joining North-North, North-South or South-South trade agreements.... (More)
The 1980’s and 1990’s was a time for increased global trade liberalisation, when more countries started to join preferential trade agreements with other states. At the same time, income inequality increased in some parts of the world. The role of trade in increasing income inequality has been debated by previous research, and has not been able to come to a conclusive answer. A central question is if there are ambiguous effects for different countries. This thesis aims to understand the relationship between preferential trade agreements and income inequality. By employing econometric tools and methods, we will try to analyse how the Gini coefficient is affected by countries joining North-North, North-South or South-South trade agreements. The Heckscher-Ohlin framework will be applied to draw hypotheses as well as to find possible explanations. Previous research is inconclusive about how income inequality is affected by increased trade liberalisation, but there is evidence that supports our hypotheses regarding South-South agreements decreasing income inequality, while North-North agreements increase income inequality. The empirical results show that North-South and the dummy variable for few North-North agreements increase the Gini coefficient, which highlights the complicated relationship between the two variables. (Less)
Please use this url to cite or link to this publication:
author
Forsström, Aline LU and Spjut, Beatrice
supervisor
organization
course
NEKH03 20242
year
type
M2 - Bachelor Degree
subject
keywords
Trade, preferential trade agreement, income inequality, Heckscher-Ohlin
language
English
id
9184078
date added to LUP
2025-05-16 10:51:00
date last changed
2025-05-16 10:51:00
@misc{9184078,
  abstract     = {{The 1980’s and 1990’s was a time for increased global trade liberalisation, when more countries started to join preferential trade agreements with other states. At the same time, income inequality increased in some parts of the world. The role of trade in increasing income inequality has been debated by previous research, and has not been able to come to a conclusive answer. A central question is if there are ambiguous effects for different countries. This thesis aims to understand the relationship between preferential trade agreements and income inequality. By employing econometric tools and methods, we will try to analyse how the Gini coefficient is affected by countries joining North-North, North-South or South-South trade agreements. The Heckscher-Ohlin framework will be applied to draw hypotheses as well as to find possible explanations. Previous research is inconclusive about how income inequality is affected by increased trade liberalisation, but there is evidence that supports our hypotheses regarding South-South agreements decreasing income inequality, while North-North agreements increase income inequality. The empirical results show that North-South and the dummy variable for few North-North agreements increase the Gini coefficient, which highlights the complicated relationship between the two variables.}},
  author       = {{Forsström, Aline and Spjut, Beatrice}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The effects of preferential trade agreements on income inequality}},
  year         = {{2025}},
}