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Household Inequality, Welfare, and the Setting of Trade Policy

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Author Info
Joseph Francois () (Faculty of Economics, Erasmus Universiteit Rotterdam)
Hugo Rojas-Romagosa () (Faculty of Economics, Erasmus Universiteit Rotterdam)

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Abstract

We analyze general equilibrium relationships between trade policy and the household distribution of income, decomposing social welfare into real income level and variance components through Gini and Atkinson indexes. We embed these inequality-adjusted social welfare functions in a general equilibrium structure mapping from tariff protection to household inequality. This yields predictions regarding the linkages between trade protection, country characteristics and inequality in Heckscher-Ohlin and Ricardo-Viner frameworks. In addition, we can separate the efficiency and equity effects of tariffs on welfare. We then examine endogenous tariff formation when policy makers care about both equity and special interests.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-086/2.

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Date of creation: 17 Aug 2004
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Handle: RePEc:dgr:uvatin:20040086

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Related research
Keywords: trade policy; household distribution of income; Atkinson index; Gini index; endogenous tariffs; tariffs and equity;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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    Other versions:
  2. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January. [Downloadable!] (restricted)
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  7. Edwards, Sebastian, 1997. "Trade Policy, Growth, and Income Distribution," American Economic Review, American Economic Association, vol. 87(2), pages 205-10, May. [Downloadable!] (restricted)
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  1. Joseph Francis Francois & Hugo ROJAS-ROMAGOSA, 2008. "Equity and International Trade," Economics working papers 2008-14, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
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