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Trade-in-task and regional income inequalities

Year: 2024

Type: article

Abstract: Adjustment mechanisms that restore equilibrium in international trade do not work at subnational level. For this reason, regions do not compete on the basis of comparative advantages. In this paper such a conceptual perspective is inserted in the Grossman and Rossi-Hansberg model (2008) to highlight the heterogeneous income distribution of the effects of trade-in-task among regions within a country. Conceptually extended also to receiving countries, the theoretical model is empirically verified for both offshoring and receiving European economies. Our results show that in offshoring countries increasing trade-in-task triggers intra-country regional income inequalities , thus promoting regional income divergence. Such result suggests the importance of redistributive regional policies . The opposite holds for receiving countries, where further trade integration is likely to boost processes of intra-country regional income convergence, suggesting that no normative actions mitigating inequality increases are required.

Source: International Economics

DOI: 10.1016/j.inteco.2024.100575

Authors: Roberta Capello, Damares Lopes Afonso, Giovanni Perucca

Institution: Politecnico di Milano

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Reduced inequalities, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,210