BioTrade and Income Inequality: Does Frontier Technology Readiness Matter?

Abstract

While empirical studies exploring the impacts of international trade on income inequality have continued to expand, yielding mixed results, less attention has been devoted to the effects of BioTrade on income redistribution. This article addresses this gap by examining the impact of BioTrade on income inequality, with a specific emphasis on the role of technological innovations. We employ a panel model encompassing 131 countries over the period 2010-2019, utilizing instrumental variable two-stage least squares and smoothed instrumental-variable quantile regression. Overall, the results indicate a strong positive link between BioTrade and income inequality, yet its effects remain heterogeneous across sub-regions and the distribution of income inequality. To elucidate this positive link, the article presents evidence of the crucial role of the level of readiness for advanced technologies. Consequently, technological innovations play a pivotal role in mitigating the accelerating effects of BioTrade on inequality. The results are robust to a battery of robustness tests, including variations in estimation methodologies, alternative measures of inequality and BioTrade, and the inclusion of control variables. These results call upon policymakers to champion technological innovations, such as Internet access and research and development, as crucial strategies for effectively and sustainably alleviating the aggravation of inequalities induced by BioTrade.