Timing of trade liberalization
AbstractThis paper studies the effects of trade liberalization on growth and long-run global income inequality using a two-country model of human capital accumulation by credit-constrained households. I show that the timing of trade liberalization is a crucial determinant of its effects on growth. Moreover, I show that the size of the long-run income gap between the two countries depends on the difference in domestic income inequality when they open up to trade. Based on these results, I analyze the effects of redistributive policy within a country. I show that redistribution in one country may increase income per capita of its trading partner if it is undertaken in a steady state, while the opposite is true if the policy is undertaken during transition.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal The Journal of International Trade & Economic Development.
Volume (Year): 16 (2007)
Issue (Month): 4 ()
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- Debraj Ray, 2006. "On the dynamics of inequality," Economic Theory, Springer, vol. 29(2), pages 291-306, October.
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