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Inequality, status effects and trade

Author

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  • Marjit, Sugata
  • Roychowdhury, Punarjit

Abstract

In this paper we attempt to examine the role of social inequality and status effects in driving trade between two countries which differ systematically only in terms of income-distribution using a status-driven model of consumption involving a status and a non-status good. Our model illustrates that when trade opens up, the country characterized by a higher level of inequality is likely to export the non-status good to the country characterized by a lower level of inequality, thus, establishing the extent of inequality as a determining factor behind comparative advantage.

Suggested Citation

  • Marjit, Sugata & Roychowdhury, Punarjit, 2012. "Inequality, status effects and trade," MPRA Paper 40225, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40225
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    File URL: https://mpra.ub.uni-muenchen.de/40225/1/MPRA_paper_40225.pdf
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    References listed on IDEAS

    as
    1. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    2. Cooper, Ben & Garcia-Penalosa, Cecilia & Funk, Peter, 2001. "Status Effects and Negative Utility Growth," Economic Journal, Royal Economic Society, vol. 111(473), pages 642-665, July.
    3. Harrison, Ann & McLaren, John & McMillan, Margaret S., 2010. "Recent findings on trade and inequality:," IFPRI discussion papers 1047, International Food Policy Research Institute (IFPRI).
    4. Ireland, N. J., 2001. "Optimal income tax in the presence of status effects," Journal of Public Economics, Elsevier, vol. 81(2), pages 193-212, August.
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    Cited by:

    1. Sugata Marjit & Lei Yang, 2015. "Accumulation with Malnutrition - The Role of Status Seeking Behavior," Discussion Papers Series 544, School of Economics, University of Queensland, Australia.
    2. Sugata Marjit & Sattwik Santra & Koushik Kumar Hati, 2018. "Status Seeking Behavior of the Poor: A Study on India," CESifo Working Paper Series 7213, CESifo.
    3. Marjit, Sugata & Santra, Sattwik & Hati, Koushik Kumar, 2014. "Does inequality affect the consumption patterns of the poor? – The role of “status seeking” behaviour," MPRA Paper 54118, University Library of Munich, Germany.

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    More about this item

    Keywords

    Inequality; Status effects; Trade;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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