Trade and Regional Inequality
This paper examines the relationship between openness and within-country regional inequality across 28 countries over the period 1975-2005, paying special attention to whether increases in global trade affect the developed and developing world diff...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100624092218 http://hdl.handle.net/10986/3833 |
| Summary: | This paper examines the relationship
between openness and within-country regional inequality
across 28 countries over the period 1975-2005, paying
special attention to whether increases in global trade
affect the developed and developing world differently. Using
a combination of static and dynamic panel data analysis, we
find that while increases in trade per se do not lead to
greater territorial polarization, in combination with
certain country-specific conditions, trade has a positive
and significant association with regional inequality. In
particular, states with higher inter-regional differences in
sector endowments, a lower share of government expenditure,
and a combination of high internal transaction costs with a
higher degree of coincidence between the regional income
distribution and regional foreign market access positions
have experienced the greatest rise in territorial inequality
when exposed to greater trade flows. This means that changes
in trade regimes have had a more polarizing effect in low
and middle-income countries, whose structural features tend
to potentiate the trade effect and whose levels of internal
spatial inequality are, on average, significantly higher
than in high-income countries. |
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