Redistributive Capacity and International Trade: A Cross-Country Analysis

ABSTRACT Existing studies have shown that the deterioration of domestic income distribution is an important cause for the decline in international trade. This paper investigates whether alleviating domestic income inequality could promote international trade. From the redistribution perspective, this study examines the relationship between state redistributive capacity and international trade by using unbalanced panel data of 153 countries from 1960 to 2018. According to our empirical findings, strengthening redistributive capacity promotes international trade by enhancing domestic society's perception of free trade. In addition, this promoting effect is independent of trade mode but varies with trade content, trade period, and trade subjects.