Regional inequalities are large in India and Brazil and represent a development challenge. This paper aims to determine whether regional disparities are linked to countries' trade openness. An annual indicator of regional inequalities is constructed for India over the period 1980-2003 and for Brazil over 1985-2003. Results from time series regressions show that Brazil's trade openness contributes to the reduction in regional inequalities in Brazil. The opposite result is found for India. India's trade openness is an important factor aggravating income inequality among Indian states. In both countries, the inflows of foreign direct investment are found to increase regional disparities.

This paper estimates the degree of trade integration between Brazilian states and the magnitude of barriers faced by their exporters in the 1990s. Using the border effects methodology, we show that the Brazilian market remains highly fragmented, although integration is increasing. In 1991 an average Brazilian state traded 37 times more with itself than with other Brazilian states. In 1999 the equivalent figure was 12. The state's international trade integration also increased over the period 1991 to 1999. Differences emerge between states. Internal and international border effects are high for Northern regions and low for Southern regions. We explore possible explanations for these findings. Copyright (c) 2009 the author(s). Papers in Regional Science (c) 2009 RSAI.

This paper employs a spatial Durbin growth model to estimate the impact of trade openness on regional per capita income in Brazil using a data set of 469 Brazilian micro-regions over the period [2004][2005][2006][2007]. We calculate the direct, indirect and cumulative impact on per capita income of trade openness and human capital in these micro-regions. Results indicate that greater trade openness in a region promotes economic development locally, while exerting negative influence on per capita income of the neighbouring regions. Our findings also show that human capital has a positive -direct and indirect -impact on the economic development of Brazilian micro-regions. JEL classification: F1, R11

This paper explores the impact of trade openness on the economic growth of Brazilian states according to their initial income level. This empiri- cal study covers 26 Brazilian states over the period 1989-2002. Growth rates of Brazilian states are modeled as dependent on international trade flows and a set of control variables such as initial income level, human capital, private and public physical capital, growth rate of labor force and a number of inter- action terms with trade openness. This empirical analysis relies on dynamic growth regressions, using the system GMM estimator. The results indicate that trade openness is more beneficial to states with a high level of initial per capita income and therefore contributes to increased regional dispari- ties in Brazil. In addition, trade openness favors more industrialized states, well-endowed in human capital, rather than states whose economic activity is mainly based on agriculture and farming. These results have important policy implications since achieving balanced territorial development has be- come a priority for the Brazilian federal government over the last few decades

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