Working Paper: CEPR ID: DP15598
Authors: Rodrigo Adao; Paul Carrillo; Arnaud Costinot; Dave Donaldson; Dina D. Pomeranz
Abstract: We develop a new factor content approach to study the impact of trade on inequality. Our analysis generalizes the theoretical results of Deardorff and Staiger (1988) and improves on past empirical implementations of these results. Combined with unique administrative data from Ecuador, our approach yields measures of individual-level exposure to exports and imports, for both capital and labor income, as well as estimates of the incidence of such exposure across the income distribution. We find that international trade raises earnings inequality in Ecuador, especially in the upper-half of the income distribution. However, the drop in inequality experienced by Ecuador over the last decade would have been less pronounced in the absence of trade.
Keywords: No keywords provided
JEL Codes: F10; F11; F12; F14; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| export exposure (F10) | pro-middle-class (P19) |
| import exposure (Y60) | pro-rich (D33) |
| trade gains (F19) | larger for high earners (J31) |
| trade gains (F19) | larger for top percentile (Y10) |
| international trade (F19) | earnings inequality (D31) |
| absence of trade (F19) | top-income individuals relatively poorer (D31) |
| trade (F19) | drop in inequality (D31) |