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Essays on Trade, Inequality, and Gravity

This dissertation is composed of three essays that focus on trade’s impacts on inequality. The first essay is an empirical analysis of trade and trade partner inequality, in the context of gravity, covering 128 exporters and 126 importers for years 1982-2000. It reveals import share’s negative average effect on income per capita, export share’s positive average effect on income per capita, differential effects of trade in favor of more developed countries, and inequality-inducing impact of contemporary trade. The second essay is an empirical analysis of trade and intranational inequality, covering 151 countries for years 1978-2010. It tests three major existing hypotheses that relate the effect of trade openness on intranational inequality. The analysis is then extended to test a non-linear hypothesis, which predicts that the effect of trade openness on intranational inequality is conditional on the level of trade openness. The results indicate that a U shape effect is significant with all three trade openness measures: export share, import share, and trade share. The third essay is a theoretical analysis of trade and international inequality, in the context of dynamic gravity. Key novel expressions are derived: balance condition and barrier-flow dynamic gravity relationship. The balance condition shows that growth of a country’s market share and trade ease puts downward pressure on the market share and trade ease of other countries. The barrier-flow dynamic gravity relationship shows that relative trade flows growth rate is inversely proportional to relative trade barriers growth rate. The dissertation contributes to our understanding of trade’s impacts on trade partner inequality, intranational inequality, and international inequality.