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Inequality, status effects and trade

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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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40225.

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Date of creation: 22 Jul 2012
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Handle: RePEc:pra:mprapa:40225

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Keywords: Inequality; Status effects; Trade;

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  1. 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.
  2. Cooper, Ben & Garcia-Penalosa, Cecilia & Funk, Peter, 2001. "Status Effects and Negative Utility Growth," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(473), pages 642-65, July.
  3. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
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Cited by:
  1. 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.
  2. Sugata Marjit & Sattwik Santra & Koushik Kumar Hati, 2014. "Does inequality affect the consumption patterns of the poor? – The role of status seeking behaviour," Discussion Papers Series 514, School of Economics, University of Queensland, Australia.

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