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Income Inequality and Choice of Free Trade in a Model of Intraindustry Trade

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  • Fischer, Ronald D
  • Serra, Pablo

Abstract

This paper explains why developed countries impose more trade barriers on middle-income countries than on either poor or other developed countries. The authors use a median voter model of the choice between trade and autarky embedded within an intraindustry trade model similar to Paul Krugman (1981). Their main result is the derivation of conditions under which a rich country rejects trade with middle-income countries but accepts trade with either similar or poor countries. The authors also show that if increased inequality lowers median wealth in the developed country, the range of countries for which free trade is rejected is enlarged. Copyright 1996, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 111 (1996)
Issue (Month): 1 (February)
Pages: 41-64

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Handle: RePEc:tpr:qjecon:v:111:y:1996:i:1:p:41-64

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Thede, Susanna, 2002. "Trade Protection and the Location of Production," Working Papers 2002:15, Lund University, Department of Economics.
  2. Francesc Obiols-Homs, 2002. "Trade Effects on the Personal Distribution of Wealth," Working Papers 0208, Centro de Investigacion Economica, ITAM.
  3. Hesham M. Abdel-Rahman & George Norman & Ping Wang, 2001. "Skill Differentiation and Income Disparity in a Decentralized Matching Model of North-South Trade," Vanderbilt University Department of Economics Working Papers 0131, Vanderbilt University Department of Economics.
  4. Susanna Thede, 2005. "Trade Policy Formation when Geography Matters for Specialisation," Working Papers 200519, School Of Economics, University College Dublin.

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