A Study On The Impact Of Trade Openness On The Developing Countries’ Domestic Income Gap

For the recent 40 years, the developing countries, including China, have a rapid development in economic, and have a rapid growth in trade but at same time they also have the big income gap. In many developing countries the Gini index have over 0.4, the international warning line for 10 years of so the income gap in developing countries has caused wide public concern. As we all know, international trade is bound to enhance each country’s overall welfare level. But, the question is whether it affects benefit distribution of different department, or has any influence on one country’s income gap. If yes, How do trade impacts the income gap? Based on the Stolper-Samuelson theorem, The article finds that the path of the trade effect the income gap via commodity price mechanism:First trade openness can make a change in the goods’price in the international market so the manufacturers will adjust supply and cause the recombination of production factors, the changes of the factors’ price, the changes of the income of the factor owners so the income gap can be changed. According to this path, Trade openness can help narrow the domestic incomes gap in developing countries.Therefore, in this paper, using trade dependency to measure trade openness and Gini index to measure income gap. And by introducing secondary-education gross enrollment rate, per capita GDP, GDP inflation index, unemployment rate and per capita cultivated hectare as control variables, corresponding models can be established. Additionally, through the employment of panel data from 22 developing countries from 2003 to 2012, it made a series of demonstration analysis. The conclusions are:Trade openness can help narrow the domestic incomes gap in developing countries. Meanwhile, both imports and exports are conducive to narrow the income gap. When the trade is split into developed and developing countries, trade with developed countries can help narrow the domestic incomes gap, but trade with developing countries can not help narrow the domestic incomes gap. However, financial crisis doesn’t affect it at all. Meanwhile, we also find that economic growth, the improvement of education level, inflation and land resources all are helpful to narrow the income gap, but the increase of unemployment rate can widen the income gap.