The Influence of Trade Liberalization to Income Inequality in the Model of Endogenious Enterpreneurship

Entrepreneurship is an integral part of modern society. This paper’s goal is to analyze the influence of trade liberalization on equilibrium share of entrepreneurs and income inequality in the model of the endogenous entrepreneurship. The research expands existing theory with a new investigation of factors that influence income inequality. The analysis is carried out using the numerical simulation method. As a result, the positive impact of trade liberalization is revealed in the economy with uniform distribution of entrepreneurial abilities and in economy where a reduction of transportation costs leads to the increase in wages. The negative effect is found in the economy with the uneven distribution of entrepreneurial abilities and in the economy with fixed wages. Keywords: trade liberalization; income inequality; endogenous entrepreneurship; entrepreneurial abilities; open economy; export.