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Household Inequality, Welfare, and the Setting of Trade Policy

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  • Joseph Francois
  • Hugo Rojas-Romagosa

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.

Suggested Citation

  • Joseph Francois & Hugo Rojas-Romagosa, 2005. "Household Inequality, Welfare, and the Setting of Trade Policy," The Institute for International Integration Studies Discussion Paper Series iiisdp81, IIIS.
    • Handle: RePEc:iis:dispap:iiisdp81
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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. 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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    More about this item

    Keywords

    trade policy; household distribution of income; Atkinson index; Gini index; political econom;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O15 - Economic Development, Innovation, 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 - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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