Endogenous liberalization and within-country inequality

Anbarci, Nejat and Ulubasoglu, Mehmet 2004, Endogenous liberalization and within-country inequality, in Selected papers from the 33rd Australian Conference of Economists, Sydney Sept. 27-30, 2004, Economic Society of Australia, Sydney, N.S.W., pp. 1-45.

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Title Endogenous liberalization and within-country inequality
Author(s) Anbarci, Nejat
Ulubasoglu, Mehmet
Conference name Australian Conference of Economists (33rd : 2004 : Sydney, Australia)
Conference location Sydney, N.S.W.
Conference dates 27-30 September 2004
Title of proceedings Selected papers from the 33rd Australian Conference of Economists, Sydney Sept. 27-30, 2004
Editor(s) Sheen, Jeffrey
Wright, Donald
Publication date 2004
Start page 1
End page 45
Publisher Economic Society of Australia
Place of publication Sydney, N.S.W.
Summary We 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.

ISBN 1864876646
9781864876642
Language eng
Field of Research 140210 International Economics and International Finance
HERDC Research category E1 Full written paper - refereed
Persistent URL http://hdl.handle.net/10536/DRO/DU:30009634

Document type: Conference Paper
Collection: School of Accounting, Economics and Finance
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