Revisiting the Link between Trade, Growth and Inequality: Lessons for Latin America and the Caribbean

By Kimberly Beaton, Aliona Cebotari, Andras Komaromi

March 9, 2017

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Kimberly Beaton, Aliona Cebotari, and Andras Komaromi. Revisiting the Link between Trade, Growth and Inequality: Lessons for Latin America and the Caribbean, (USA: International Monetary Fund, 2017) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We revisit the relationship between international trade, economic growth and inequality with a focus on Latin America and the Caribbean. The paper combines two approaches: First, we employ a cross-country panel framework to analyze the macroeconomic effects of international trade on economic growth and inequality considering the strength of trade connections as well as characteristics of countries’ export markets and products. Second, we consider event studies of past episodes of trade liberalization to extract general lessons on the impact of trade liberalization on economic growth and its structure and inequality. Both approaches consistently point to two broad messages: First, trade openness and connectivity to the center of the trade network has substantial macroeconomic benefits. Second, we do not find a statistically significant or economically sizable direct impact of trade on overall income inequality.

Subject: Economic integration, Exports, Income inequality, International trade, National accounts, Trade integration, Trade liberalization, Trade policy

Keywords: Asia and Pacific, Caribbean, Exports, Global, Globalization, Growth, Growth outcome, Income inequality, Inequality, Latin America, Liberalization, Trade, Trade integration, Trade liberalization, Trade liberalization, Trade network, Trade openness, Trade policy, Trade-growth regression, World trade network, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/046
Stock No:

WPIEA2017046
ISBN:

9781475585551
ISSN:

1018-5941

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