The impact of international trade on income inequality in the United States since 1970’s

Abstract

This research analyzes the impact of openness to trade on the level of income inequality in the United States. Using time series data of periods between 1970 and 2014, this study found that trade increases income inequality. It is also found that an increase in trade volume leads to a wider income gap as more income goes to the top 10% wealthiest people in the United States. When elaborating trade into export side and import side, it is found that both of them significantly contribute to a higher income inequality when it is measured by GINI. However, it is only the import side that contributes to the increase in the income share of the top 10%. This study also found that there is a negligible effect of FDI inflow on income inequality in the United States.