Inequalities in Trade

Reducing inequalities both between and within countries is a major concern of policymakers. One aspect that is left out of many studies concerning sustainable development at the national level is the importance of globalization and participation in international trade. The following chapter sheds light on the differences regarding the integration of countries into the world trade network and the developments over the last five decades (1968–2016). To that end, we use a very rich dataset of bilateral trade from CHELEM-INT (CEPII) covering the trade flows between 72 countries between 1968 and 1990 and 84 countries between 1994 and 2016, detailed to a level of 147 products. Results show that trade inequality measured with the help of the Theil-Index decreased significantly over the investigation period. Whereas in the late 1960s, mostly highly developed countries were (almost) fully integrated in international trade, many Southern American, Asian and African countries significantly increased their participation over the course of time. However, even during the last decades of hyper-globalization, important differences between countries continued to persist. This is largely explained by their different specialization patterns emerging from unequal access to natural resources, technological innovation, and education.