Oil trade rents and international income inequality

Abstract

This paper investigates the role of oil rents as implicit transfers that redistribute global income through international trade channels. It involves estimating these rents, calculating the redistributive effect, exploring the role of exports and imports and the different impact depending on income per capita. The results document that (i) implicit international oil trade rents lead to a positive but declining reduction in international income inequality, although it becomes regressive after 2001 using PPP income estimates; (ii) redistribution is basically generated via exports, with imports playing a minor role; and (iii) international oil rents have a greater impact on the countries in the lowest deciles. The novelty of this work is that, for the first time, the international redistributive effect of oil rents is studied, by introducing the concept of implicit transfers in international trade, which opens up new fields of research in the area of global income inequality.