This paper examines the relationship between intra-product trade and regional income distribution by empirical tests of co-integration and Granger causality with time series data from 1994 to 2013. The conclusion shows that intra-product trade and regional income distribution have a long-term equilibrium relationship. The exports of intra-product trade can significantly reduce the income gap between urban and rural residents, while the imports have a negative influence. At the meantime, the intra-product exports and imports are the one-way causal of income distribution. In addition, the capital contribution can enlarge the urban and rural income gap significantly. Education also has a negative influence, but it is non-significant.
This study contributes in the existing literature in two main areas. First, this study focuses on the effect of intra-product trade on urban and rural income gap. Second, this study does an empirical test with Liaoning China which is rarely discussed in the intra-product trade literature.
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