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International Trade as Determined by Income and Income Distribution

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  • Beiling Yan

Abstract

In standard trade theory, consumption is normally assumed to be homothetic. Consequently, income and its distribution have no role in determining international trade patterns. This paper examines the assumption and its implications. The assumption of homothetic preferences is rejected at the 1% level. It further demonstrates that the Heckscher-Ohlin-Vanek (HOV) model modified by allowing for non-homothetic taste improves the performance of HOV prediction and explains some of the trade puzzles and paradoxes.

Suggested Citation

  • Beiling Yan, 2007. "International Trade as Determined by Income and Income Distribution," International Economic Journal, Taylor & Francis Journals, vol. 21(4), pages 633-651.
    • Handle: RePEc:taf:intecj:v:21:y:2007:i:4:p:633-651
    DOI: 10.1080/10168730701699141
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    References listed on IDEAS

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    1. Anthony Atkinson & Timothy Smeeding & Lee Rainwater, 1994. "Income Distribution in European Countries," LIS Working papers 121, LIS Cross-National Data Center in Luxembourg.
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    Cited by:

    1. Dezhong Duan & Qifan Xia, 2022. "From the United States to China? A trade perspective to reveal the structure and dynamics of global electronic‐telecommunications," Growth and Change, Wiley Blackwell, vol. 53(2), pages 823-847, June.

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