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Does wealth inequality reduce the gains from trade?

Mauro Caselli
Review of World Economics / Weltwirtschaftliches Archiv
Vol. 148, No. 2 (June 2012), pp. 333-356
Published by: Springer
Stable URL: http://www.jstor.org/stable/41485798
Page Count: 24
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Does wealth inequality reduce the gains from trade?
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Abstract

This paper refines and tests the hypothesis that the impact of opening to trade on a country's economic growth is affected by the inequality of its distribution of wealth. Analysis of panel data on 44 developing countries between 1960 and 2000 suggests that the difference in growth rates between the period an economy is open and the period it is closed depends inversely on the degree of wealth inequality prior to opening. There is evidence to suggest that access to credit and lack thereof may lie behind these results, thus highlighting a new aspect of the role of financial development.

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