Trade and Income Inequality in Developing Countries (original) (raw)
We use a dynamic specification to estimate the impact of trade on within-country income inequality in a sample of 65 developing countries (DCs) over the 1980-1999 period. Our results suggest that trade with high income countries worsen income distribution in DCs, both through imports and exports. These findings provide support to the hypothesis that technological differentials and the skill biased nature of new technologies may be important factors in shaping the distributive effects of trade. Moreover, we observe that the previous results only hold for middle income countries (MICs); we interpret this evidence by considering the greater potential for technological upgrading in MICs. we wish to thank the discussant Paolo Piacentini and all the participants for their useful comments and suggestions. Precious insights by Mariacristina Piva and Gianluca Grimalda are also gratefully acknowledged. Finally, comments and suggestions by four anonymous referees were very useful for improving the submitted version of this paper. Usual caveats apply.
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