Tariff Reduction and Income Inequality: Some Empirical Evidence

Rojas-Vallejos, Jorge; Turnovsky, Stephen J.

doi:10.1007/s11079-017-9439-y

Cited by 20 publications

(12 citation statements)

References 51 publications

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“…The country's openness is theoretically linked to income distribution (see, for example, Heckscher 1919, Ohlin 1933, Samuelson 1953, and Melitz and Redding 2015. The sum of imports and exports is used to measure trade openness (see, for example, Cameron 1978, Rojas-Vallejos and Turnovsky 2017, and Wong 2017. The level of development is also linked to inequality.…”

Section: A Datamentioning

confidence: 99%

“…Changes in population, measured by the annual percentage growth in population, affect changes in labor supply and demand, which affect wages in the labor market. An increase in population is expected to increase income inequality if the unemployment rate increases (see, for example, Asteriou, Dimelis, and Moudatsou 2014;Rojas-Vallejos and Turnovsky 2017;Wong 2017). Oil rents (as a share of GDP) are used to account for resource-rich regimes that can afford to gain legitimacy by redistributing revenue (Ross 2001, Wong 2017.…”

Section: A Datamentioning

confidence: 99%

“…This can lead to thinking about a nonlinear analysis. We included the nonlinear analysis into the methodology, following the studies of Tan and Law (2012), predicting a hump or inverted U-shaped relationship between income inequality and financial factors in line with Shahbaz et al (2015), studying the Kuznets curve between financial development and income inequality in line with Rojas-Vallejos and Turnovsky (2017), and exploring the nonlinear relationship between tariff reductions and income inequality. The square term of the explanatory variable is included into the equation as follows: 2…”

Section: A Nonlinearity Analysismentioning

confidence: 99%

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Government Intervention, Institutional Quality, and Income Inequality: Evidence from Asia and the Pacific, 1988–2014

Blancheton

Chhorn

2021

Asian Development Review

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We examine the linear and nonlinear long-run relationship between public expenditure and institutional quality, and income inequality in Asia and the Pacific. By applying panel cointegration methods using a dataset from 1988 to 2014, our main findings suggest that public expenditure and institutional quality have negative long-run, steady-state effects on income inequality in Asia and the Pacific. The effect of institutional quality has only a one-way Granger causality link to income inequality. The existence of a nonlinear relationship between public expenditure and institutional factors linked to income inequality is also found. It implies that, at the early stage of institutional development, a country whose economy has experienced higher public expenditure generates rising income inequality; then, in the long run, when the country improves its institutional quality, higher public expenditure results in lower income inequality.

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Section: A Datamentioning

confidence: 99%

Section: A Datamentioning

confidence: 99%

Section: A Nonlinearity Analysismentioning

confidence: 99%

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Government Intervention, Institutional Quality, and Income Inequality: Evidence from Asia and the Pacific, 1988–2014

Blancheton

Chhorn

2021

Asian Development Review

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“…This study uses two types of tariff rates: (a) Tariff1 is the weighted average of effectively applied tariff rate for all products, and (b) Tariff2 is the unweighted average of effectively applied tariff rate for all products, which is used in the sensitivity test. Past literature finds that the relationship between trade liberalization through tariff reductions and income inequality can be negative (Jaumotte et al, ) or positive (Rojas‐Vallejos & Turnovsky, ). The data on tariff rates were obtained from World Development Indicators database.…”

Section: Empirical Analysismentioning

confidence: 99%

“…Recently, using a multicountry dataset from 1981 to 2003, Jaumotte, Lall, and Papageorgiou () find that trade liberalization via tariff reductions can lead to a decrease in income inequality, thereby echoing the Heckscher–Ohlin prediction for the case of developing economies. In contrast, using the data for the period from 1984 to 2010, Rojas‐Vallejos and Turnovsky () refute the Heckscher–Ohlin prediction by showing that tariff reductions could raise income inequality in the short run, while less so conclusive in the long run.…”

Section: Introductionmentioning

confidence: 98%

Trade liberalization, firm entry, and income inequality

Chao

Nguyễn

et al. 2019

Rev International Economics

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This paper examines the short-and long-run effects of trade liberalization via tariff reductions on income inequality in an economy, which is characterized by an imperfectly competitive urban manufacturing sector and a perfectly competitive rural agricultural sector. Tariff reductions reduce domestic output in the importable urban manufacturing sector, leading to shifts of capital from the urban sector to the rural agricultural sector. This can narrow the wage gap between skilled and unskilled labor in the short run. However, the lowered capital cost attracts new firms, and subsequently excessive entry of firms, to the urban manufacturing sector. This firm entry effect can mitigate the favorable effect of tariff reductions on wage inequality in the long run. Empirical study confirms the findings.

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Does trade openness andFDIreduce inequality? Evidence from South Asia

2020

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This study seeks to examine whether trade openness and inward FDI may affect income distribution in an unbalanced panel of five South Asian countries over the period of 1990-2016. The analysis of the model involves the examination of likely non-linear effect of both trade and FDI on income distribution. Therefore, dynamic panel system-generalized method of moments (SYS-GMM) estimator has been applied to mitigate the problem of nonlinearity and possible endogeneity. In the second stage, the model is extended to test the impact of education on income inequality. The hypothesis was that secondary school enrolment speeds up the process of adoption of contemporary technology and decreases inequality. The results reveal that trade and FDI have significant effects on income inequality, however, inverted U-shaped curve holds for trade as purposed by the trade theory. The component wise effect of trade was also held, except imports from advanced countries. The joint effect of trade and FDI through education has produced mixed results. South Asia needs to invest in social infrastructure and swifter the process of openness to achieve the desired goal of equitable prosperity.

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Tariff Reduction and Income Inequality: Some Empirical Evidence

Cited by 20 publications

References 51 publications

Government Intervention, Institutional Quality, and Income Inequality: Evidence from Asia and the Pacific, 1988–2014

Government Intervention, Institutional Quality, and Income Inequality: Evidence from Asia and the Pacific, 1988–2014

Trade liberalization, firm entry, and income inequality

Does trade openness andFDIreduce inequality? Evidence from South Asia

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