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Inequality and trade

Author

Listed:
  • Devashish Mitra
  • Vitor Trindade

Abstract

. We incorporate demand‐side considerations in trade in a systematic but straightforward way. We do so by focusing on the role of inequality in the determination of trade flows and patterns. With non‐homothetic preferences, when countries are similar in all respects but asset inequality, we find that trade is driven by specialization in consumption, not production. Besides, these assumptions allow us to generate some interesting international spillover effects of redistributive policies. Finally, we study a model of monopolistic competition and find a novel V‐shaped relationship between the ratio of inter‐industry to intra‐industry trade and a country's inequality. JEL classification: F11, F12 Inégalité et commerce. On introduit des considérations de demande d’une manière systématique et simple dans un modèle de commerce international. On le fait en mettant l’accent sur le rôle de l’inégalité dans la détermination des flux et des patterns de commerce. A partir de postulats de préférences non homothétiques et de pays en tous points similaires sauf pour ce qui est de l’inégalité des actifs, on montre que le commerce est conformé par la spécialisation dans la consommation et non dans la production. De plus ces postulats permettent de déduire quelques effets de débordement internationaux des politiques de redistribution. Enfin, on étudie un modèle de concurrence monopolistique et on découvre une relation inédite en forme de V entre le ratio du commerce inter et intra industries d’un pays et l’inégalité dans ce pays.

Suggested Citation

  • Devashish Mitra & Vitor Trindade, 2005. "Inequality and trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1253-1271, November.
  • Handle: RePEc:wly:canjec:v:38:y:2005:i:4:p:1253-1271
    DOI: 10.1111/j.0008-4085.2005.00324.x
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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