Bryant University Economics Professor Jongsung Kim publishes research on the affect of Free Trade Agreements on Income Inequality.
The number of Free Trade Agreements between countries has greatly increased during the last two decades. Despite numerous studies on the effect of trade on income inequality, a possible linkage between Free Trade Agreements (FTAs) and income inequality had not been thoroughly examined.
This study, from Bryant University Professor Jongsung Kim in collaboration with Jae-Jwa Lee of Dongguk University, concluded that the number of FTA notifications to the WTO for both goods- and service-related trade, does have an effect on income inequality, but overall trade openness does not. A finding of note was that FTAs for the goods trade and FTAs for the service trade have opposite effects on income inequality. The higher FTA notifications related to goods trade reduce income inequality, while the higher FTA notifications related to services trade increase it.
The results of this research highlight the importance of bilateral and regional trade through Free Trade Agreements rather than multilateral trade from overall trade openness and its impact on income inequality. Since the impact of FTAs for the service trade on income inequality is positive and that of FTAs for the goods trade is negative, and the impact of the former is greater in absolute value than that of the latter, and the rising share of trade in the service sector will lead to a larger income gap between skilled and unskilled workers in a country. The findings also suggest that the recent rising share of trade expansion through intra-industry trade rather than inter-industry trade is of particular importance in examining the income distributional consequences of trade liberalization.
This study helped fill a gap in research on the impact of trade on earnings inequality that existed since the year 2000, the majority having been produced in the 1980s and the 1990s.
ABOUT PROFESSOR JONGSUNG KIM
Dr. Kim teaches the Labor Economics and Foundations of Quantitative Analysis courses in the Graduate Program in Applied Economics at Bryant University. He is a member of the American Economic Association, Eastern Economic Association, Korean-American Economic Association, Omicron Delta Epsilon, and the Society of Labor Economists.
As evidenced by this study, one of Professor Kim's key areas of interest is International Trade. He recently said, “I'm particularly interested in the impact of international trade on the U.S. labor market. The recent summit between U.S. president Donald Trump and Chinese President Xi Jinping has the potential to start a new chapter of international trade order. I'll be watching with great interest.”
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Do Free Trade Agreements Affect Income Inequality
An Empirical Investigation
Jae-Hwa Leea, Department of International Trade, Dongguk University
Jongsung Kim, Department of Economics, Bryant University, USA