THE IMPACT OF TRADE GAP ON INCOME INEQUALITY IN AZERBAIJAN: AN EMPIRICAL ANALYSIS

Abstract

In this study, the impact of trade openness on income inequality in Azerbaijan was investigated from theoretical and empirical aspects. Acceleration of globalization processes and expansion of foreign trade relations have strengthened the integration of the country's economy into international markets and become one of the main sources of economic growth. At the same time, how the economic benefits created by trade openness are distributed among population groups remains one of the important socio-economic issues.

The study examined the relationship between trade openness and income inequality based on Heckscher–Ohlin and Stolper–Samuelson models, as well as modern empirical approaches. Taking into account the high dependence of Azerbaijan on the oil and gas sector, the characteristics of the export structure and the level of development of the non-oil sector, the mechanisms of influencing the distribution of trade openness on income distribution were analyzed.

The results of the study are expected to show that the impact of trade openness on income inequality depends on the structural characteristics of the economy. Especially in the context of the predominance of the oil sector, there is a possibility that the trade openness will increase the income gap. At the same time, the development of the non-oil sector and the diversification of exports can enhance the positive impact of trade on social welfare and reduce income inequality. The results of the study are important in terms of ensuring inclusive economic development in Azerbaijan, improving export policy and developing economic policy measures aimed at more equitable distribution of incomes.