Trade and Income Distribution Lauren Allen & Sylvia Cesar

Variables X: trade openness Y: income distribution Interaction term: regime type International trade theory indicates each open country will have its winners and losers, typically the owners of the abundant factor of production win, and the owners of the scarce one “lose” due to the comparative advantage lying abroad. We want to test whether the losses from trade and the unemployment that comes with it are better ameliorated in democracies than in autocracies.

Hypothesis: democracies are better at redistributing the losses and gains from trade

Related Literature Democracy and trade Developing Countries

Methodology Income distribution Trade Openness Regime Type SWIID Gini coefficient (post-tax) Trade Openness WDI Regime Type DD Dichotomous indicator (1-0) The Standardized World Income Inequality Database (SWIID) uses a custom missing-data multiple-imputation algorithm to standardize observations collected from the United Nations University’s World Income Inequality Database version 2.0c, the OECD Income Distribution Database, the Socio-Economic Database for Latin America and the Caribbean generated by CEDLAS and the World Bank, Eurostat, the World Bank’s PovcalNet, the UN Economic Commission for Latin America and the Caribbean, the World Top Incomes Database, the University of Texas Inequality Project, national statistical offices around the world, and many other sources. Luxembourg Income Study data serves as the standard.

Democracies Autocracies Gini Coefficient Gini Coefficient Openness to Trade Openness to Trade

Later on: Controlling GDP per Capita Lagging Effects Regions Seen as a simple scatterplot of Gini and Openness, we observed a correlation was not evident. Thus, we will later control for variables such as GDP per capita and geographical region, in order to draw conclusions from smaller samples and hopefully observe a clearer relation between our x and y in such samples. We will also conduct a lagged regression of Gini, that is, if we believe the effects of openness in year 1 will show in income distribution until year 2, we will lag income distribution one year, and expect to see a higher correlation between our x and y.

Take-Away Effect of regime type Test hypothesis further

Questions