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Market Imperfections, Wealth Inequality, and the Distribution of Trade Gains

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  • Manuel Oechslin
  • Reto Foellmi

Abstract

We explore the role of the ownership structure of capital in an economy that suffers from barriers to entry and an imperfect financial system. In such an environment, an unequal distribution of capital provides an explanation for trade flows and trade gains even when countries do not differ in relative factor endowments or available technologies. Moreover, an uneven asset distribution is associated with a large import-competing sector and only a small number of export-oriented entrepreneurs. Along these lines, we suggest that an unequal asset distribution may be key to understand why still many less developed countries protect their firms from foreign competition.

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Bibliographic Info

Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 266.

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Date of creation: Jan 2006
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Handle: RePEc:zur:iewwpx:266

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Keywords: inequality; trade policy; economic development;

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Cited by:
  1. Spiros Bougheas & Rod Falvey, . "The Impact of Financial Market Frictions on Trade Flows, Capital Flows and Economic Development," Discussion Papers 11/01, University of Nottingham, GEP.
  2. Foellmi, Reto & Oechslin, Manuel, 2012. "Globalization and Productivity in the Developing World," Economics Working Paper Series 1203, University of St. Gallen, School of Economics and Political Science.
  3. Carré, Martine & Riboni, Alessandro, . "Unequal societies, Unequal Terms of Trade and Trade Policy," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/10331, Université Paris-Dauphine.
  4. Martin Grossmann & Helmut Dietl, 2012. "Asymmetric contests with liquidity constraints," Public Choice, Springer, vol. 150(3), pages 691-713, March.
  5. Taiji Furusawa & Noriyuki Yanagawa, 2010. "Firm Heterogeneity under Financial Imperfection: Impacts of Trade and Capital Movement," CARF F-Series CARF-F-233, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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