Is There an Openness Kuznets Curve?

Abstract

One of the key features of research on income inequality is the search for a Kuznets curve. Two curvilinear relationships in particular have been documented in the literature: one between inequality and income and the other between inequality and environmental factors. More recently, inequality and its link to trade liberalisation has received a good deal of attention, not least because it is among the major controversies provoked by the globalisation process. The outcomes for developing countries of greater openness do not fit neatly with the predictions of standard trade theory. Given this, it is natural to ask whether the relationship between trade openness and inequality may be better understood in terms of the Kuznets hypothesis. To this end, the study tests the Kuznets hypothesis in the context of trade liberalisation using data for Latin America. The evidence is new and is consistent with the Kuznets hypothesis: inequality increases with trade openness until a critical level of openness is reached after which inequality begins to fall. The curvilinear relationship between openness and inequality suggests that Latin American countries should continue with trade liberalisation measures but also introduce redistribution policies to ease the (initial) adverse consequences of liberalisation. Copyright 2009 Blackwell Publishing Ltd.

A closer look at financial development and income distribution

“…However, economic integration seems to exert a positive short-run impact on inequality levels . This suggests that the lower quintiles of the workforce benefit from economic openness in the middle run and that trade integration carries short-run distributional costs, in line with Dobson and Ramlogan (2009 Turning to banking sector variables, we find that increased banking credit tends to increase inequalities (Figs. 1-4 and 12).…”

Income inequality and macroeconomic activity: A study of the Peruvian case

“…Dobson and Ramlogan (2008) found evidence that supports the Kuznets hypothesis for 18 Latin-American countries. Subarna and Heyse (2006) use panel data models to test the Kuznets hypothesis and found a positive relationship among variables.…”

The Global Kuznets Curve, 1969-2007

“…The relative ease of international capital and technology flow might obscure the intra-national labor flow originally suggested by Kuznets as the mechanism for producing the inverted U shaped curve relating national economic development and income inequality. Additionally, the development and evolution of a Kuznets curve might be affected by whether or not the economic data being examined are from a relatively open or closed economic system [10]. By including the entire global economy, as was done in this analysis, a "closed" economic system was analyzed that may have influenced the opportunity of observing a Kuznets curve.…”