Trade Openness and Income Inequality: Fresh Evidence Based on Different Inequality Measures

  • Noor Ahmed Khoso Department of Business Administration, Sukkur IBA University, Pakistan
  • Sheraz Rajput Department of Business Administration, Sukkur IBA University, Pakistan
  • Tariq Aziz Department of Business Administration, Sukkur IBA University, Pakistan
  • Akseer Hussain Department of Business Administration, Sukkur IBA University, Pakistan
  • Agha Jahanzeb Department of Business Administration, Sukkur IBA University, Pakistan
Keywords: income inequality, trade openness, Gini coefficient, two-step GMM

Abstract

Theoretical and empirical literature on the impact of trade openness on income inequality is inconclusive. The inconsistent findings may be partly the result of biased measures of income inequality and divergent data sources. This paper improves upon the previous literature by examining the impact of trade openness on income inequality, using data from three major data sources: the Standardized World Income Inequality Database (SWIID), including disposable and market income; World Development Indicators (WDI); and the University of Texas Inequality Project (UTIP); as well as four Gini coefficients as measures of inequality. We apply a two-step system GMM estimation technique and the findings suggest a negative relationship between trade openness and income inequality. Based on the empirical results, we conclude that changing the measure of inequality from different data sources does not affect the empirical results related to the trade-inequality relationship.

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Published
2021-07-31
How to Cite
Khoso, N. A., Rajput, S., Aziz, T., Hussain, A., & Jahanzeb, A. (2021). Trade Openness and Income Inequality: Fresh Evidence Based on Different Inequality Measures. Applied Economics Journal, 28(2), 63-81. Retrieved from https://so01.tci-thaijo.org/index.php/AEJ/article/view/245051
Section
Research Articles