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Inequality, public good provision and the composition of trade

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  • Mahsa Jahan Dideh

Abstract

This paper investigates the effect of trade liberalization on the provision of public goods and shows that inequality also plays a vital role here. Public goods help enhance the productivity of firms, lower prices and raise profitability. The provision of public goods has different effects in closed and open economies. In an open economy, the impact of productive spending on increasing profit is stronger. Consequently, the opening up of the economy shifts the benefits of productive public goods from consumers to firms. As the median voters’, share of the firm’s profit rises, public goods become more appealing and flourish. Consequently, the manufacturing export is boosted by a rise in productivity.

Suggested Citation

  • Mahsa Jahan Dideh, 2020. "Inequality, public good provision and the composition of trade," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 28(2), pages 265-313, April.
  • Handle: RePEc:wly:ectrin:v:28:y:2020:i:2:p:265-313
    DOI: 10.1111/ecot.12231
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