By Maiko Ito
An outline of the white paper on the global economy and trade to be published by the Ministry of Economy, Trade, and Industry (METI) in late June was shared with the press. The paper analyzes the relationship between trade and inequality because “free trade drives economic growth and contributes to reducing disparity.” It also warns against strengthening protectionism by stating “there is a growing sense of dissatisfaction with globalization driven by expanding inequality in developed nations, namely the U.S.”
Data of 23 OECD member nations for 2000 -2014 was analyzed to see how trade affects the Gini coefficient, which measures household income disparities on a scale of zero to one.
While a Gini coefficient of one expresses maximal inequality, when a nation’s trade value rises by 1% of GDP, the Gini coefficient, on average, drops by 0.004 points, thereby reducing inequality. Meanwhile, if information and communication technology investment was to increase by 1% of GDP, the Gini coefficient would increase 0.007 points, which means “technological innovation is a significant contributor to disparity.”
While the white paper promotes free trade, it stresses the need to improve training in IT-related fields.