Trade and income distribution: Is natural disaster an actor?

Abstract

This paper examines the impact of trade on household income inequality (measured using Gini index) under the condition of disaster (measured using various proxies). The paper uses panel regression on a balanced dataset of 48 countries for 2011-2017 to estimate the impacts, with data combined from World Development Indicators, World Income Inequality Database, and World Risk Report. Various robustness checks are also carried out. The results show that trade does not have any impact on inequality on its own. However, with the existence of disaster, the increase of trade leads to higher income inequality. Finally, the effects are stable when disaster is measured using Composite index or Vulnerability component but becomes not clear when using Exposure component, suggesting that it is vulnerability the main factor that moderates the impact of trade on income inequality.