Nonlinearity in the Relationship between Trade and Income

다국어 초록 (Multilingual Abstract)

Recent studies have found a strong positive effect of international trade on real income. And some have suggested that this relationship may vary with the level of economic development. Using the instrument-variable threshold regressions approach proposed by Caner and Hansen(2004), this study finds evidence that trade openness contributes to uneven development. Greater trade openness tends to have beneficial effects on real income for more industrialized countries. For less developed countries, however, trade openness appears to influence real income in a significant and negative way. The findings imply that greater international trade and integration may foster inequality of nations, and hence contribute to more diverging economies.

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