Trade Openness and Spatial Inequality

Abstract

Income inequality had been focused by economists for a long time, but due to the shortage of within-country income data, there has been still limited studies on spatial inequality and leave this relationship inconclusive. This paper used satellite images of light density at night as a proxy for spatial inequality and put forward whether changes in trade openness matter for the evolution of spatial disparities in ASEAN countries from 1992 to 2010. Two different measures of inequality are employed: Gini, and Theil indices. Using static and dynamic panel data analysis to separate short- and long term results, the findings indicate that an increase of international trade can lead to higher spatial inequality in short run, but trade openness has less association with spatial inequality in the long-run. It can be interpreted that short-run spatial inequalities resulting from changes in trade openness are persistent in the long-run. This conclusive remark may reinforce preexisting inequality in each ASEAN country.