Journal of Korea Trade

Korea Trade Research Association (한국무역학회)
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The Nexus between International Trade, FDI and Income Inequality

  • Wang, Meiling (Department of International Economics & Trade, Jiangsu Normal University) ;
  • Park, Noori (Department of International Trade, Dankook University) ;
  • Choi, Chang Hwan (Department of International Trade, Dankook University)
  • Received : 2019.10.17
  • Accepted : 2020.06.10
  • Published : 2020.06.30
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Abstract

Purpose - This paper investigated the effect of international trade affects income inequality. It also compares the different effects between developing and developed countries over the period from 2005 to 2014 for 58 countries. Design/methodology - The econometric estimation was used to identify the relationship between export, import, FDI, GDP, unemployment and income inequality. In this empirical analysis, we utilized a Vector Error Correction (VEC) model using panel data. Findings - The findings show that there is a close correlated between trade and income inequality. The higher export ratio of GDP tends to have a 1.79 times more income inequality in developing countries than in developed countries. The higher import ratio of GDP tends to have a 2.44 times higher income inequality in developing countries than in developed countries. Further, Increasing FDI tend to have an approximately 1.43 times higher income inequality in developing countries than in developed countries. Korea is in the middle of developed and developing countries' result. Originality/value - To correct the global income inequality regarding trade, developed countries' proactive trade policies, such as granting preferential tariff benefits to developing countries, are likely to be needed and Income Safety Net in international trade must be taken into account.

Keywords

Acknowledgement

The present research was conducted by the research fund of Dankook University in 2019.

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