DP9428 Trade openness and spatial inequality in emerging countries
Emerging world countries have experienced over the last two decades a significant change in their trade patterns. Bold trade reforms have been followed by rapid rises in international trade levels. However, despite these radical changes, we know remarkably little about how changes in trade patterns are affecting the evolution of regional inequality in the developing world. This paper addresses the link between trade openness and spatial inequality across 22 emerging countries over the period between 1990 and 2006. Our findings show that changes in international trade bring about a significant rise in within country inequality across the developing world and that this impact is greatest in the poorest countries. This result is robust to the inclusion of a number of control variables, and to changes in the specification of the sample and in the measure used to quantify the level of regional disparities. Consequently, the increase in trade exposure across the emerging world, while possibly benefiting the countries involved in the process in aggregate terms, is generating winning and losing regions.