The Investigation of the Relationship between Trade Openness and Income Inequality for BRICS-T Countries: Panel VAR Approach

Yıl 2022, Cilt: 7 Sayı: 3, 677 - 696, 30.09.2022

Volkan Han

https://doi.org/10.30784/epfad.1062453

Öz

The implementation of liberal economic policies in developing countries has increased the interaction between trade and economic growth. This development emerges as an important mechanism that leads to a significant increase in income disparities. This study, it is aimed to examine the relationship between income inequality and trade openness with the Panel Var analysis method, using the data between 1992-2019 for the BRICS-T countries, which are expressed as the world's emerging economies. According to the analysis findings, the increase in trade openness causes an increase in income inequality in the selected developing country group. But, the increase in foreign direct investments and economic growth has a reducing effect on the injustice in income distribution. Granger causality test results support the panel VAR results, and trade openness without a feedback relationship is a one-way cause of income inequality. It also has bidirectional causality with income inequality, foreign direct investment and economic growth. Finally, FDI and trade openness are one-way drivers of economic growth. Consistent with the literature, this study supports the hypothesis that liberalization policies in trade, especially in developing countries, increase income inequality. Policies should be developed to attract more foreign investors, both to ensure economic growth and to contribute to reducing income inequality.

Anahtar Kelimeler

Trade Openness, Income Inequality, Economic Development, BRICS-T countries, Panel VAR Analysis

BRICS-T Ülkelerinde Ticari Dışa Açıklık ve Gelir Eşitsizliği Arasındaki İlişkinin İncelenmesi: Panel VAR Yaklaşımı

Öz

Gelişmekte olan ülkelerde liberal ekonomi politikalarının uygulanması, ticaret ve ekonomik büyüme arasındaki karşılıklı etkileşimi artırmıştır. Bu gelişme gelir farklılıklarında belirgin bir artışa yol açan önemli bir mekanizma olarak karşımıza çıkmaktadır. Bu çalışmada, Dünya’nın yükselen ekonomileri olarak ifade edilen BRICS-T ülkeleri için 1992-2019 yılları arasındaki veriler kullanılarak Panel Var analizi yöntemi ile gelir eşitsizliği ve ticari açıklık arasındaki ilişkinin incelenmesi amaçlanmaktadır. Analiz bulgularına göre ticari açıklığın artması, seçilen gelişmekte olan ülke grubunda gelir eşitsizliğinin artmasına neden olmaktadır. Diğer taraftan doğrudan yabancı yatırımların ve ekonomik büyümenin artması gelir dağılımındaki adaletsizliği azaltıcı bir etkiye sahiptir. Granger nedensellik testi sonuçları, panel VAR sonuçlarını desteklemektedir ve geri besleme ilişkisi olmaksızın ticari açıklık, gelir eşitsizliğinin tek yönlü nedenidir. Ayrıca gelir eşitsizliği, doğrudan yabancı yatırımlar ve ekonomik büyüme ile çift yönlü nedenselliğe sahiptir. Son olarak doğrudan yabancı yatırımlar ve ticari açıklık, ekonomik büyümenin tek yönlü nedenidir. Özellikle gelişmekte olan ülkelerde var olan ticarette serbestleşme politikalarının gelir eşitsizliğini artırması hipotezi bu çalışmada literatüre de uygun olarak desteklenmektedir. Hem ekonomik büyümeyi sağlamak hem de gelir eşitsizliğini azaltmaya katkıda bulunmak için daha fazla yabancı yatırımcıyı çekmek için politikalar geliştirilmelidir.

Anahtar Kelimeler

Ticari Açıklık, Gelir Eşitsizliği, Ekonomik Büyüme, BRICS-T ülkeleri, Panel VAR Analizi

Kaynakça

• Abrigo, M.R.M. and Love, I. (2016). Estimation of panel vector autoregression in Stata. The Stata Journal: Promoting Communications on Statistics and Stata, 16(3), 778–804. https://doi.org/10.1177/1536867X1601600314
• Acharyya, R. (2011). A note on quantitative trade restrictions, income effects and wage inequality. Economic Modelling, 28(6), 2628-2633. https://doi.org/10.1016/j.econmod.2011.07.020
• Acheampong, A.O. (2018). Economic growth, CO2 emissions and energy consumption: What causes what and where? Energy Economics, 74, 677-692. https://doi.org/10.1016/j.eneco.2018.07.022
• Anderson, E. (2005). Openness and inequality in developing countries: A review of theory and recent evidence. World Development, 33(7), 1045-1063. https://doi.org/10.1016/j.worlddev.2005.04.003
• Asteriou, D., Dimelis, S. and Moudatsou, A. (2014). Globalization and income inequality: A panel data econometric approach for the EU27 countries. Economic Modelling, 36, 592-599. https://doi.org/10.1016/j.econmod.2013.09.051
• Bensidoun, I., Jean, S. and Sztulman, A. (2011). International trade and income distribution: Reconsidering the evidence. Review of World Economics, 147(4), 593-619. https://doi.org/10.1007/s10290-011-0107-9
• Berisha, E., Gupta, R. and Meszaros, J. (2020). The impact of macroeconomic factors on income inequality: Evidence from the BRICS. Economic Modelling, 91, 559-567. https://doi.org/10.1016/j.econmod.2019.12.007
• Bourguignon, F. and Morrisson, C. (1990). Income distribution, development and foreign trade: A cross-sectional analysis. European Economic Review, 34(6), 1113-1132. https://doi.org/10.1016/0014-2921(90)90071-6
• Calderón, C. and Chong, A. (2001). External sector and income inequality in interdependent economies using a dynamic panel data approach. Economics Letters, 71(2), 225-231. https://doi.org/10.1016/S0165-1765(01)00374-3
• Canova, F. and Ciccarelli, M. (2013). Panel vector autoregressive models: A Survey. In T.B. Fomby, L. Kilian and A. Murphy (Eds.), VAR models in macroeconomics – New developments and applications: essays in honor of Christopher A. Sims: Volume 32 (pp. 205-246). https://doi.org/10.1108/S0731-9053(2013)0000031006
• Canova, F., Ciccarelli, M. and Ortega, E. (2007). Similarities and convergence in G-7 cycles. Journal of Monetary Economics, 54(3), 850-878. https://doi.org/10.1016/j.jmoneco.2005.10.022
• Castilho, M., Menéndez, M. and Sztulman, A. (2012). Trade liberalization, inequality, and poverty in Brazilian states. World Development, 40(4), 821-835. https://doi.org/10.1016/j.worlddev.2011.09.018
• Dabla-Norris, M.E., Kochhar, M.K., Suphaphiphat, M.N., Ricka, M.F. and Tsounta, M.E. (2015). Causes and consequences of income inequality: A global perspective (IMF Discussion Note, SDN/15/13). Retrieved from https://www.elibrary.imf.org/view/journals/006/2015/013/article-A001-en.xml
• Daumal, M. (2013). The impact of trade openness on regional inequality: The cases of India and Brazil. The International Trade Journal, 27(3), 243-280. https://doi.org/10.1080/08853908.2013.796839
• De Maio, F.G. (2007). Income inequality measures. Journal of Epidemiology & Community Health, 61(10), 849-852. http://dx.doi.org/10.1136/jech.2006.052969
• Deininger, K. and Squire, L. (1996). A new data set measuring income inequality. The World Bank Economic Review, 10(3), 565-591. https://doi.org/10.1093/wber/10.3.565
• Dollar, D. and Kraay, A. (2004). Trade, growth, and poverty. The Economic Journal, 114(493), 22-49. https://doi.org/10.1111/j.0013-0133.2004.00186.x
• Dorn, F., Fuest, C. and Potrafke, N. (2022). Trade openness and income inequality: New empirical evidence. Economic Inquiry, 60(1), 202-223. https://doi.org/10.1111/ecin.13018
• Dufrenot, G., Mignon, V. and Tsangarides, C. (2010). The trade-growth nexus in the developing countries: A quantile regression approach. Review of World Economics, 146(4), 731-761. https://doi.org/10.1007/s10290-010-0067-5
• Ezcurra, R. and Rodríguez-Pose, A. (2014). Trade openness and spatial inequality in emerging countries. Spatial Economic Analysis, 9(2), 162-182. https://doi.org/10.1080/17421772.2014.891155
• Fischer, R.D. (2001). The evolution of inequality after trade liberalization. Journal of Development Economics, 66(2), 555-579. https://doi.org/10.1016/S0304-3878(01)00174-2
• Frankel, J.A. and Romer, D.H. (1999). Does trade cause growth? American Economic Review, 89(3), 379-399. https://doi.org/10.1257/aer.89.3.379
• Granger, C.W. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society, 424-438. https://doi.org/10.2307/1912791
• Grossman, G.M. and Helpman, E. (1991). Trade, knowledge spillovers, and growth. European Economic Review, 35(2-3), 517-526. https://doi.org/10.1016/0014-2921(91)90153-A
• Im, K.S., Pesaran, M.H. and Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
• Jaumotte, F., Lall, S. and Papageorgiou, C. (2013). Rising income inequality: Technology, or trade and financial globalization? IMF Economic Review, 61(2), 271-309. https://doi.org/10.1057/imfer.2013.7
• Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 45(1), 1-28. Retrieved from https://www.jstor.org/
• Love, I. and Zicchino, L. (2006). Financial development and dynamic investment behavior: Evidence from panel VAR. The Quarterly Review of Economics and Finance, 46(2), 190-210. https://doi.org/10.1016/j.qref.2005.11.007
• Mahesh, M. (2016). The effects of trade openness on income inequality-evidence from BRIC countries. Economics Bulletin, 36(3), 1751-1761. Retrieved from http://www.accessecon.com/
• Meschi, E. and Vivarelli, M. (2009). Trade and income inequality in developing countries. World Development, 37(2), 287-302. https://doi.org/10.1016/j.worlddev.2008.06.002
• Milanovic, B. (2005). Can we discern the effect of globalization on income distribution? Evidence from household surveys. The World Bank Economic Review, 19(1), 21-44. https://doi.org/10.1093/wber/lhi003
• Pesaran, M.H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22, 265-312. https://doi.org/10.1002/jae.951
• Piketty, T. (2003). Income inequality in France, 1901–1998. Journal of Political Economy, 111(5), 1004-1042. https://doi.org/10.1086/376955
• Piketty, T. and Saez, E. (2003). Income inequality in the United States, 1913–1998. The Quarterly Journal of Economics, 118(1), 1-41. https://doi.org/10.1162/00335530360535135
• Rodríguez-Pose, A. (2012). Trade and regional inequality. Economic Geography, 88(2), 109-136. https://doi.org/10.1111/j.1944-8287.2012.01147.x
• Sims, C.A. (1980). Macroeconomics and reality. Econometrica: Journal of the Econometric Society, 1-48. https://doi.org/10.2307/1912017
• Solt, F. (2009). Standardizing the world income inequality database. Social Science Quarterly, 90(2), 231-242. Retrieved from https://fsolt.org/swiid/
• Stolper, W.F. and Samuelson, P.A. (1941). Protection and real wages. The Review of Economic Studies, 9(1), 58-73. Retrieved from https://www.jstor.org/
• Teng, Y., Cox, A. and Chatziantoniou, I. (2021). Environmental degradation, economic growth and tourism development in Chinese regions. Environmental Science and Pollution Research, 1-13. https://doi.org/10.1007/s11356-021-12567-9
• Ulasan, B. (2012). Openness to international trade and economic growth: A cross-country empirical investigation (SSRN Paper No. 2087930). Retrieved from http://dx.doi.org/10.2139/ssrn.2087930
• Wang, M., Park, N. and Choi, C.H. (2020). The nexus between international trade, FDI and income inequality. Journal of Korea Trade, 24(4), 18-33. https://doi.org/10.35611/jkt.2020.24.4.18
• World Development Indicators. (2019). Databank. Retrieved from https://databank.worldbank.org/source/world-development-indicators
• World Inequality Database. (2021). World inequality report. Retrieved from https://wid.world/
• Xu, C., Han, M., Dossou, T.A.M. and Bekun, F.V. (2021). Trade openness, FDI, and income inequality: Evidence from Sub‐Saharan Africa. African Development Review, 33(1), 193-203. https://doi.org/10.1111/1467-8268.12511
• Zakaria, M. and Fida, B.A. (2016). Trade openness and income inequality in China and the SAARC Region. Asian‐Pacific Economic Literature, 30(2), 33-44. https://doi.org/10.1111/apel.12152