Income distribution, factor endowments, and trade openness

Abstract

This paper studies the empirical links among factor endowments, trade and personal income distribution. By using panel data, we show that land and capital intensive countries have a less equal income distribution while skill intensive countries have a more equal income distribution. We also show that the effects of trade openness on inequality depend on factor endowments in a way consistent with several recent case studies but not with the simple Hecksher–Ohlin framework. Our results are robust to the division of the sample according to level of income, the inclusion of different regressors, the use of different measures of trade openness and of relative factor abundance, and tests for possible problems of endogeneity.