Trading with richer and poorer countries: trade integration and regional inequality in Greece

Andrés Rodríguez-Pose,Alexandra Sotiriou

doi:10.1007/s00168-021-01062-1

Andrés Rodríguez-Pose, Alexandra Sotiriou

Open Access

https://doi.org/10.1007/s00168-021-01062-1

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Abstract

This paper examines the link between increased trade and regional GDP growth across the regional income distribution in Greece during the post-EMU period (2000–2013). By means of quantile regression techniques, panel fixed effects and system generalized method of moments (GMM), we disentangle the effects of EU trade—trading with generally richer countries—versus global trade—in the case of Greece, mostly trading with poorer countries—at several points of the regional income distribution to identify differences in trade elasticities. The analysis finds that the impact of EU trade is highly heterogeneous and mainly affects negatively the economy of the richer regions in Greece. In contrast, the effects of EU trade display insignificant results for the lower-income regions, attributed to the absence of direct substitution effects.

Highlights

Trade integration is normally expected to unravel a multitude of benefits in terms of growth-inducing factors, such as larger market access, productivity, and knowledge transfer gains
It may pose a serious of threats, such as substitution effects for the domestic competing industries and to those vulnerable regions more exposed to the trade integration dynamics (Petrakos et al 2012; Autor et al 2013)
In this study we have explored the impact across the regions of Greece of increases in trade with generally more developed countries—represented by trade with the EU—and trade with less developed countries—represented by the rest of the world

Summary

Introduction

Trade integration is normally expected to unravel a multitude of benefits in terms of growth-inducing factors, such as larger market access, productivity, and knowledge transfer gains. It may pose a serious of threats, such as substitution effects for the domestic competing industries and to those vulnerable regions more exposed to the trade integration dynamics (Petrakos et al 2012; Autor et al 2013). Increased trade is expected to produce large macro-economic benefits, but. While some regions within a country may reap the lion’s share of these benefits, others may lose out both in terms of economic performance and employment, triggering negative social and political reactions

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