Redistributing Gains from Globalisation
AbstractThis paper analyses the effects of redistribution in a model of international trade with heterogeneous firms in which a fair-wage effort mechanism leads to firm-specific wage payments and involuntary unemployment. The redistribution scheme is financed by profit taxes and gives the same absolute lump-sum transfer to all workers. In this setting a higher tax rate reduces aggregate labour income and makes the income distribution more equal, with unemployment remaining unaffected. International trade increases aggregate income, income inequality and the unemployment rate, ceteris paribus. If, however, trade is accompanied by a suitably chosen increase in the profit tax rate, it is possible to achieve higher aggregate income and a more equal income distribution than in autarky, provided that the share of exporters is sufficiently high.
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Bibliographic InfoPaper provided by University of Nottingham, GEP in its series Discussion Papers with number 08/29.
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Redistribution; Heterogeneous Firms; Fair Wages; Wage Inequality; Unemployment; Trade Liberalisation;
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- Del Gatto, Massimo & Mion, Giordano & Ottaviano, Gianmarco Ireo Paolo, 2006.
"Trade Integration, Firm Selection and the Costs of Non-Europe,"
CEPR Discussion Papers
5730, C.E.P.R. Discussion Papers.
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- M. Del Gatto & G. Mion & GIP. Ottaviano, 2007. "Trade Integration, Firm Selection and the Costs of Non-Europe," Working Paper CRENoS 200703, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- DEL GATTO, Massimo & MION, Giordano & OTTAVIANO, Gianmarco I.P., 2006. "Trade integration, firm selection and the costs of non-Europe," CORE Discussion Papers 2006061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Marco de Pinto, 2012. "Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis," MAGKS Papers on Economics 201210, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- George Chouliarakis & Monica Correa-Lopez, 2012. "A Fair Wage Model of Unemployment with Inertia in Fairness Perceptions," Working Papers 1203, BBVA Bank, Economic Research Department.
- Marco de Pinto, 2012. "Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis," FIW Working Paper series 092, FIW.
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