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Income Inequality as a Determinant of Trade Flows

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Author Info

  • Bohman, Helena

    ()
    (Jönköping International Business School)

  • Nilsson, Désirée

    ()
    (Jönköping International Business School)

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    Abstract

    Consumer studies have a long tradition of incorporating non-homothetic preferences in their models, whereas this has been very uncommon in studies of international trade. We use a model from Mitra and Trindade (2005) to set up a gravity model in which we include income distribution measures as explanatory variables for the exporting as well as for the importing countries. Our results indicate that non-homothetic preferences significantly affect both exports and imports.

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    Bibliographic Info

    Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 73.

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    Length: 28 pages
    Date of creation: 22 Sep 2006
    Date of revision:
    Handle: RePEc:hhs:cesisp:0073

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    Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
    Phone: +46 8 790 95 63
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    Related research

    Keywords: income inequality; trade flows;

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    References

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    1. Vitor Trindade & Muhammed Dalgin & Devashish Mitra, 2006. "Inequality, Nonhomothetic Preferences, And Trade: A Gravity Approach," Working Papers 0606, Department of Economics, University of Missouri, revised 08 May 2006.
    2. Francois, Joseph F & Kaplan, Seth, 1996. "Aggregate Demand Shifts, Income Distribution, and the Linder Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 244-50, May.
    3. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Catherine Pattillo & Måns Söderbom & Francis Teal & Albert Z, 2002. "Do African Manufacturing Firms Learn from Exporting?," CSAE Working Paper Series 2002-09, Centre for the Study of African Economies, University of Oxford.
    4. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    5. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May.
    6. Clements, Kenneth W & Selvanathan, Saroja, 1994. "Understanding Consumption Patterns," Empirical Economics, Springer, vol. 19(1), pages 69-110.
    7. Kenneth W. Clements & Ye Qiang, 2001. "The Economics of Global Consumption Patterns," Economics Discussion / Working Papers 01-18, The University of Western Australia, Department of Economics.
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    Cited by:
    1. E. Gencer & William Anderson, 2014. "An intra-industry trade model in a vertical differentiation framework," The Annals of Regional Science, Springer, vol. 52(1), pages 201-226, January.

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