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A note on quantitative trade restrictions, income effects and wage inequality

  • Acharyya, Rajat

This paper examines the effects of conversion of one type of physical trade restrictions into another on the intra-country wage inequality in a standard 2×2×2 Heckscher–Ohlin–Samuelson model. It shows that a conversion of an import-quota into an equivalent voluntary export restraint raises wage-inequality in the country importing the unskilled-labor intensive good and lowers the wage-inequality in its trading partner. This result does not depend on whether the unskilled-labor intensive good or the skilled-labor intensive good was initially subject to an import quota. Conversion of the import-quota into an equivalent import tariff, on the other hand, may lead to a rise in wage inequality in both countries. The driving force behind these results is the real income effect that conversion of one type trade restriction instrument into another results in.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 6 ()
Pages: 2628-2633

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:6:p:2628-2633
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