International Trade and Income Convergence from the Perspective of Korea

This study examines the impact of increasing trade on income convergence in terms of a fixed effects panel data model from the perspective of Korea for the period 1991-2005. Particular attention is paid to the way increasing trade flows interact with economic growth to create rapid income convergence. The study finds that there has been a significant reduction in the income gaps between Korea and its trading partners. The regression results show that when the trade intensity ratio increased by 1%, then the per capita income gap ratio between Korea and its trading partners was shrank by 0.3% through 0.9% respectively. The paper concludes by suggesting certain directions that further research might take in order to shed more light on this important issue, such as income convergence or divergence, with respect to globalization.