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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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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Shorrocks, Anthony F, 1983.
"Ranking Income Distributions,"
Economica,
London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
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