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Trade Openness and Income Inequality: Fresh Evidence Based on Different Inequality Measures

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  • Khoso, Noor Ahmed
  • Rajput, Sheraz
  • Aziz, Tariq
  • Hussain, Akseer
  • Jahanzeb, Agha

Abstract

Theoretical and empirical literature on the impact of trade openness on income inequality is inconclusive. The inconsistent findings may be partly the result of biased measures of income inequality and divergent data sources. This paper improves upon the previous literature by examining the impact of trade openness on income inequality, using data from three major data sources: the Standardized World Income Inequality Database (SWIID), including disposable and market income; World Development Indicators (WDI); and the University of Texas Inequality Project (UTIP); as well as four Gini coefficients as measures of inequality. We apply a two-step system GMM estimation technique and the findings suggest a negative relationship between trade openness and income inequality. Based on the empirical results, we conclude that changing the measure of inequality from different data sources does not affect the empirical results related to the trade-inequality relationship.

Suggested Citation

  • Khoso, Noor Ahmed & Rajput, Sheraz & Aziz, Tariq & Hussain, Akseer & Jahanzeb, Agha, 2021. "Trade Openness and Income Inequality: Fresh Evidence Based on Different Inequality Measures," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 28(2).
    • Handle: RePEc:ags:thkase:334386
    DOI: 10.22004/ag.econ.334386
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    Cited by:

    1. Rajput, Sheraz Mustafa & Javaid, Muhammad Nadeem & Junaid, Ahmad, 2023. "Financial Development and Income Inequality: A U-shaped Relationship," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 30(2), July.
    2. Koh, Sharon G. M. & Lee, Grace H. Y. & Siah, Audrey K. L., 2022. "The Resurgence of Income Inequality in Asia-Pacific: The Role of Trade Openness, Educational Attainment and Institutional Quality," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 11-27.

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    More about this item

    Keywords

    International Development;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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