We revisit the relationship between international trade, economic growth and inequality
with a focus on Latin America and the Caribbean. The paper combines two approaches:
First, we employ a cross-country panel framework to analyze the macroeconomic effects
of international trade on economic growth and inequality considering the strength of trade
connections as well as characteristics of countries’ export markets and products. Second,
we consider event studies of past episodes of trade liberalization to extract general lessons
on the impact of trade liberalization on economic growth and its structure and inequality.
Both approaches consistently point to two broad messages: First, trade openness and
connectivity to the center of the trade network has substantial macroeconomic benefits.
Second, we do not find a statistically significant or economically sizable direct impact of
trade on overall income inequality.
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