ANALYSIS OF THE INFLUENCE OF INTERNATIONAL TRADE AND PER CAPITA INCOME ON ECONOMIC INEQUALITY IN THE UNITED STATES 1975-2023
DOI:
https://doi.org/10.65886/ijde.v1i4.47Keywords:
Income inequality, Trade openness, Economic growth, Time series, Gini IndexAbstract
This study examines the relationship between income inequality and trade openness to economic growth in the United States during the period 1975 to 2023. The study answers the classic question: does globalization encourage inclusive development or does it widen economic disparities? In particular, this study asks how trade and income inequality affect the trajectory of real GDP per capita. The novelty of this study lies in the integration of the variables of inequality and trade in a single long-term time series model over nearly five decades, an approach that is still rarely applied in studies focusing on the United States context. Unlike previous studies that generally examined these two variables separately, this study brings them together in one simultaneous analytical framework. Using quantitative methods and annual data from the World Development Indicators, this study applied multiple regression analysis, ADF stationarity test, Johansen cointegration test, and Granger causality test. The results show that GDP is already stationary at the level, while the Gini and Trade Indices are stationary after the first differentiation. No long-term equilibrium relationship (cointegration) between variables was found, but there was a two-way causal relationship between inequality and GDP. The findings show that both income inequality and trade openness have a significant effect on economic growth, albeit through different mechanisms. The influence of trade is contextual depending on the quality of institutions and the flexibility of the labor market, whereas inequality has a more direct macroeconomic impact. These findings support the structuralist critique that liberalization requires redistribution mechanisms to avoid inequality. This study concludes that openness and growth can go hand in hand, but must be supported by inclusive policies. Redistribution mechanisms, progressive taxes, and investment in human capital are key to ensuring equitable distribution of growth results. Further research is suggested using dynamic models such as ARDL or VECM and extending the scope of variables to technological, institutional, and fiscal policy aspects.
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