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Trade Openness and Income Inequality

Jakobsson, Amanda (2006)
Department of Economics
Abstract
During the 1980s and 1990s more and more countries opened up their economies to trade and increased their volumes of trade. In the same period of time it has been said that income inequality increased in many parts of the world. The aim of this thesis is to discover whether increased income inequality can be related to trade openness. This relationship is studied using three different hypotheses. The hypotheses are based in Hecksher-Ohlin models of trade, the simple 2x2x2 version as well as an expanded version. Six different measures of trade openness are used, both policy-based and outcome-based measures. Openness in itself is found to be somewhat related with high inequality, at least for the 1990s. The predictions of Heckscher-Ohlin... (More)
During the 1980s and 1990s more and more countries opened up their economies to trade and increased their volumes of trade. In the same period of time it has been said that income inequality increased in many parts of the world. The aim of this thesis is to discover whether increased income inequality can be related to trade openness. This relationship is studied using three different hypotheses. The hypotheses are based in Hecksher-Ohlin models of trade, the simple 2x2x2 version as well as an expanded version. Six different measures of trade openness are used, both policy-based and outcome-based measures. Openness in itself is found to be somewhat related with high inequality, at least for the 1990s. The predictions of Heckscher-Ohlin theory, that inequality increases in wealthy countries and decreases in poor countries as a result of increased trade, cannot be supported in this study. Neither can the predictions saying that inequality increases in capital and land abundant countries while decreases in labor abundant countries when they are faced with trade openness. According to this study, the contrary appears to be the case, which also have been found in earlier studies. There is some evidence that skill abundant countries experience higher inequality with openness, as is predicted by Heckscher-Ohlin theory. (Less)
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@misc{1848561,
  abstract     = {During the 1980s and 1990s more and more countries opened up their economies to trade and increased their volumes of trade. In the same period of time it has been said that income inequality increased in many parts of the world. The aim of this thesis is to discover whether increased income inequality can be related to trade openness. This relationship is studied using three different hypotheses. The hypotheses are based in Hecksher-Ohlin models of trade, the simple 2x2x2 version as well as an expanded version. Six different measures of trade openness are used, both policy-based and outcome-based measures. Openness in itself is found to be somewhat related with high inequality, at least for the 1990s. The predictions of Heckscher-Ohlin theory, that inequality increases in wealthy countries and decreases in poor countries as a result of increased trade, cannot be supported in this study. Neither can the predictions saying that inequality increases in capital and land abundant countries while decreases in labor abundant countries when they are faced with trade openness. According to this study, the contrary appears to be the case, which also have been found in earlier studies. There is some evidence that skill abundant countries experience higher inequality with openness, as is predicted by Heckscher-Ohlin theory.},
  author       = {Jakobsson, Amanda},
  keyword      = {Income Inequality,trade openness,Heckscher-Ohlin theory,openness measures,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {Trade Openness and Income Inequality},
  year         = {2006},
}