Trade Openness and Cross-country Income Differences

Hepenstrick, Christian und Tarasov, Alexander (29. Mai 2013): Trade Openness and Cross-country Income Differences. SFB/TR 15 Discussion Paper No. 402

Abstract

Development accounting literature usually attributes the observed cross-country variation in per capita income to differences in countries' factor endowments and total factor productivity (the Solow residual). While the former can be relatively straightforward interpreted and measured, the latter remains at least partly a black box. In this paper, we provide a structural interpretation for differences in total factor productivity across countries and quantitatively explore the role of trade barriers in explaining cross-country income differences. In particular, we find that giving all countries the same market entry costs or giving all country-pairs the same variable trade costs reduces inequality by around 13%.

• Dokumententyp: Paper
• Publikationsform: Preprint
• Keywords: General equilibrium, market access costs, development accounting, experiments
• Fakultät: Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems ; Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B7 - Globalisierung und der Anstieg der Vorstandsbezüge
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: F11, F12, O10, O40
• Sprache: Englisch