Jared Enochs

Date of Award

Spring 2019

Degree Name

Bachelor of Science (BS)

Advisor(s)

James McCann

Abstract

This paper investigates the relationship between trade policies and income inequality, building on existing literature that highlights openness in trade as a potential tool for reducing disparities. Classic economic theory suggests that free trade fosters greater efficiency and income increases, particularly in developing countries. However, these benefits often disproportionately favor the wealthy, thereby exacerbating income inequality. The study utilizes G.C. Lim and Paul D. McNelis' findings as a baseline, emphasizing that specific policies under certain conditions can indeed decrease income disparity. The research differentiates itself by exploring how various aggregate trade policies—such as capital controls, tariffs, and quotas—interact with economic outcomes in different country contexts (developed vs. less developed trading nations). By measuring the Gini coefficient, a statistical measure of distribution, this paper categorizes countries based on their trade policies to analyze the effects on income inequality over time. The significance of this research lies in its practical implications; identifying effective trade policies could guide governments toward strategies that not only enhance economic growth but also promote more equitable income distribution. This is crucial for reducing global poverty and improving overall economic participation among all societal segments. The study concludes that while trade increases national incomes, it often benefits higher income groups disproportionately, suggesting that targeted trade policies are necessary to ensure broader income gains and reduce inequality. Further investigation into specific policy impacts is recommended to solidify these findings and aid policy formulation.

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