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Non-gravity trade

Vol: 
52/2020
Author name: 
Brueckner M
Long NV
Vespignani J
Year: 
2020
Month: 
May
Abstract: 

This paper examines the relationship between countries’ bilateral trade with the United States that is not due to gravity (non-gravity trade) and the distribution of income within countries. In countries where only a small share of the population are educated, an increase in non-gravity trade is associated with a significant increase in income inequality. As education of the population increases the correlation between non-gravity trade and income inequality becomes smaller. Non-gravity trade has no significant effect on income inequality in countries that are world leaders in education.

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