The Impact of International Trade on Income Inequality in the SADC Region

This study examines the influence of international trade on income inequality within the Southern African Development Community (SADC) by employing the Ordinary Least Squares (OLS) Panel Fixed Effects and the Two-Stage Least Squares (2SLS) Panel Instrumental Variable Approach. The findings indicate an inverse correlation between international trade and income inequality, suggesting that trade can contribute to equitable income distribution in the SADC region. However, the study also reveals that the impact of trade on inequality varies across income groups, with trade generally increasing inequality in countries outside the least developed nations. The results further highlight the role of resource endowment in shaping income inequality, showing that trade tends to increase inequalities in resource-rich economies due to the uneven distribution of economic gains. These findings challenge the universality of conventional trade theories, particularly the Stolper-Samuelson theorem, in the context of the SADC region. The study contributes to the growing body of literature by providing region-specific insights and recommending targeted policy interventions to ensure that trade benefits are more equitably distributed.