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Trade and income at different stages of economic development

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  • Dong-Hyeon Kim
  • Shu-Chin Lin

Abstract

Recent research has found a strong positive effect of international trade on real income. We propose that this relationship may vary with the level of economic development. Using the instrument variable threshold regressions approach proposed by Caner and Hansen (2004), we find evidence that trade openness contributes to uneven development. Greater trade openness tends to have beneficial effects on real income for more industrialized countries. For less developed countries, however, trade openness appears to influence real income in a significantly negative way. The findings imply that greater international trade and integration may foster inequality of nations and hence contribute to more diverging economies.

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  • Dong-Hyeon Kim & Shu-Chin Lin, 2012. "Trade and income at different stages of economic development," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 409-421, February.
    • Handle: RePEc:taf:applec:44:y:2012:i:4:p:409-421
    DOI: 10.1080/00036846.2010.508726
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    2. Chari, Murali D.R. & Banalieva, Elitsa R., 2015. "How do pro-market reforms impact firm profitability? The case of India under reform," Journal of World Business, Elsevier, vol. 50(2), pages 357-367.
    3. Gnangnon, Sèna Kimm, 2021. "Effect of poverty on financial development: Does trade openness matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 97-112.
    4. Gnangnon, Sèna Kimm, 2020. "Effect of Poverty on Services Export Concentration in Developing Countries," EconStor Preprints 223178, ZBW - Leibniz Information Centre for Economics.
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    6. Irena Antošová & Jana Stávková, 2019. "Application of the Institute of Income Redistribution in the Form of Social Transfers in EU Countries," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 161-172, June.
    7. Sèna Kimm Gnangnon, 2022. "Does poverty deter foreign direct investment flows to developing countries?," International Journal of Economic Policy Studies, Springer, vol. 16(1), pages 297-330, February.
    8. Redmond, Trumel & Nasir, Muhammad Ali, 2020. "Role of natural resource abundance, international trade and financial development in the economic development of selected countries," Resources Policy, Elsevier, vol. 66(C).
    9. Breunig, Robert & Majeed, Omer, 2020. "Inequality, poverty and economic growth," International Economics, Elsevier, vol. 161(C), pages 83-99.
    10. Peters, Jörg, 2015. "Von Staaten, Märkten und Subventionen: Paradigmenwechsel in der Armutsbekämpfung?," RWI Materialien 85, RWI - Leibniz-Institut für Wirtschaftsforschung.

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