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International Transmission of Inequality through Trade

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  • Sergey Nigai

Abstract

I examine the international transmission of income inequality through trade. Using firm-level and aggregate data, I find that exporting to more unequal countries increases domestic inequality. I rationalize this finding by developing a model of international consumer targeting in which firms serve specific consumer segments in each market. Inequality in export markets shapes the distribution of firms' profits and, therefore, the incomes of individuals linked to them, widening domestic inequality. The calibrated model suggests that international inequality transmission explains 4.4 percent and 4.8 percent of the observed levels of Gini coefficients and income shares of the top 1 percent, respectively.

Suggested Citation

  • Sergey Nigai, 2025. "International Transmission of Inequality through Trade," American Economic Journal: Economic Policy, American Economic Association, vol. 17(3), pages 311-344, August.
    • Handle: RePEc:aea:aejpol:v:17:y:2025:i:3:p:311-44
    DOI: 10.1257/pol.20230497
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    References listed on IDEAS

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    1. ., 2023. "Development indicators at the global level," Chapters, in: Macroeconomics for Development, chapter 2, pages 15-29, Edward Elgar Publishing.
    2. Fernandes, Ana M. & Freund, Caroline & Pierola, Martha Denisse, 2016. "Exporter behavior, country size and stage of development: Evidence from the exporter dynamics database," Journal of Development Economics, Elsevier, vol. 119(C), pages 121-137.
    3. Frederick Solt, 2020. "Measuring Income Inequality Across Countries and Over Time: The Standardized World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 101(3), pages 1183-1199, May.
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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