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Endogenous liberalization and within-country inequality
conference contribution
posted on 2004-01-01, 00:00 authored by Nejat AnbarciNejat Anbarci, Mehmet UlubasogluMehmet UlubasogluWe model and empirically test the link between income inequality and trade liberalization. We consider a society in which a median voter (MV) will make the decision as to whether the country should switch from its current regime of import substitution (IS) (which protects agriculture) to export promotion (EP). Liberalization entails starting importing the agricultural good and specializing in and exporting the manufacturing good. This will require transferring labor to manufacturing. We find that if MV is a worker, the IS-EP switch will take place regardless. If MV is a farmer, the switch will take place given (1) the relative productivity of an ex-farmer and worker in manufacturing,ß is high, and (2) the society’s tastes for agricultural goods, α, are not as strong as those for manufacturing goods. We also find that, following a switch, the income distribution too will improve if α is low and ß is high. In our empirical analysis, we find the endogenous inflection points of α and ß in our sample, at which the direction of change in income distribution alters its sign. Our results also show in a very robust fashion that, EP regimes - on average and with the presence of certain control variables - have better income distributions than IS regimes. This implies that mostly “right” countries have made the switch.
History
Event
Australian Conference of Economists (33rd : 2004 : Sydney, Australia)Pagination
1 - 45Publisher
Economic Society of AustraliaLocation
Sydney, N.S.W.Place of publication
Sydney, N.S.W.Start date
2004-09-27End date
2004-09-30ISBN-13
9781864876642ISBN-10
1864876646Language
engPublication classification
E1 Full written paper - refereedEditor/Contributor(s)
J Sheen, D WrightTitle of proceedings
Selected papers from the 33rd Australian Conference of Economists, Sydney Sept. 27-30, 2004Usage metrics
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