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Redistributing Gains from Globalisation

  • Hartmut Egger
  • Udo Kreickemeier

This 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. International trade increases aggregate income and income inequality, "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. Copyright The editors of the "Scandinavian Journal of Economics" 2009 .

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 111 (2009)
Issue (Month): 4 (December)
Pages: 765-788

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Handle: RePEc:bla:scandj:v:111:y:2009:i:4:p:765-788
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  1. 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).
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