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Trade Policy and the Household Distribution of Income

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  • Francois, Joseph
  • Rojas-Romagosa, Hugo

Abstract

We explore the relationship between import protection and the household distribution of income. We first develop a general-equilibrium mapping from tariffs to household inequality measures. This also yields predictions for linkages between tariffs, development level, and observed household inequality. Working with a new dataset, we then examine cross-country variation in inequality with respect to import protection. Results are consistent with predictions of the factor-intensity model of trade. Regression results suggest that import protection makes income distribution worse for countries in labour-intensive diversification cones. This relationship shifts to one of falling inequality as incomes rise and we move to capital-intensive diversification cones.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4436.

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Date of creation: Jun 2004
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Handle: RePEc:cpr:ceprdp:4436

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Related research

Keywords: atkinson index; distribution of income; gini coefficient; globalization; inequality; tariffs; trade;

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References

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  1. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
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  12. Antonio Spilimbergo & Juan Luis Londoño & Miguel Székely, 1997. "Income Distribution, Factor Endowments, and Trade Openness," Research Department Publications 4088, Inter-American Development Bank, Research Department.
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  14. Deardorff, Alan V, 1982. "The General Validity of the Heckscher-Ohlin Theorem," American Economic Review, American Economic Association, vol. 72(4), pages 683-94, September.
  15. J. David Richardson, 1995. "Income Inequality and Trade: How to Think, What to Conclude," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 33-55, Summer.
  16. Thomas W. Hertel & Paul V. Preckel & John A.L. Cranfield & Maros Ivanic, 2003. "Multilateral Trade Liberalization and Poverty in Brazil and Chile," Economie Internationale, CEPII research center, issue 94-95, pages 201-233.
  17. Burgess, David F, 1976. "Tariffs and Income Distribution: Some Empirical Evidence for the United States," Journal of Political Economy, University of Chicago Press, vol. 84(1), pages 17-45, February.
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Citations

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Cited by:
  1. Joseph Francois & Hugo Rojas-Romagosa, 2007. "Equity and Trade Policy," IIDE Discussion Papers 20070501, Institue for International and Development Economics.
  2. Hugo Rojas-Romagosa & J.F. Francois, 2008. "Reassessing the relationship between inequality and development," CPB Discussion Paper 107, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Joseph Francis Francois & Hugo ROJAS-ROMAGOSA, 2008. "Equity and International Trade," Economics working papers 2008-14, Department of Economics, Johannes Kepler University Linz, Austria.

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