Trade and Income Inequality in Developing Countries

We use a dynamic specification to estimate the impact of trade oil within-country income inequality in a sample of 65 developing countries [DCs] over the 1980 99 period. Our results Suggest that trade with high income countries worsen income distribution it) DCs, through both imports and exports, These findings provide Support to the hypothesis that technological differentials and the skill biased nature of new technologies may be important factors in shaping the distributive effects of trade. Moreover, we observe that the previous results only hold For middle-income countries (MICs) we intcrpret this evidence by considering the grater potential for technological upgrading in MIC's. (C) 2008 Elsevier Ltd. All rights reserved.