IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_6474.html
   My bibliography  Save this paper

Trade, Inequality and Distribution-Neutral Fiscal Policy - An Elementary Framework

Author

Listed:
  • Sugata Marjit
  • Lei Yang

Abstract

Theoretical discussion on compensating mechanisms involving the Pareto criterion that address inequality rather than absolute welfare is non-existent in trade literature. In a simple HOS model we consider tax-transfer policies that keep the pre-trade degree of inequality unchanged between skilled and unskilled workers rather than the absolute income of the losing group. We discuss the problem of existence of such an inequality-neutral tax rate which generates a positive increment in the after tax skilled wage and unskilled wage. Such a mechanism exists and is independent of whether the tax is progressive or proportional. Thus the compensating mechanism that is available in this standard model is stronger than the conventional Pareto criterion.

Suggested Citation

  • Sugata Marjit & Lei Yang, 2017. "Trade, Inequality and Distribution-Neutral Fiscal Policy - An Elementary Framework," CESifo Working Paper Series 6474, CESifo.
    • Handle: RePEc:ces:ceswps:_6474
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp6474.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Subhayu Bandyopadhyay & Sugata Marjit & Lei Yang, 2014. "International oligopoly, barriers to outsourcing and domestic employment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(4), pages 1372-1386, November.
    2. Chakrabarti, Avik, 2004. "Asymmetric adjustment costs in simple general equilibrium models," European Economic Review, Elsevier, vol. 48(1), pages 63-73, February.
    3. Robert C. Feenstra, 2010. "Offshoring in the Global Economy: Microeconomic Structure and Macroeconomic Implications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262013835, December.
    4. Anthony B. Atkinson, 2000. "The Changing Distribution of Income: Evidence and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(1), pages 3-18, February.
    5. Marjit, Sugata & Sarkar, Sandip, 2016. "Distributional Neutral Welfare Ranking-Extending Pareto Principle," MPRA Paper 74928, University Library of Munich, Germany.
    6. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
    7. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
    8. Paul R. Krugman, 2008. "Trade and Wages, Reconsidered," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 103-154.
    9. Davis, Donald R. & Harrigan, James, 2011. "Good jobs, bad jobs, and trade liberalization," Journal of International Economics, Elsevier, vol. 84(1), pages 26-36, May.
    10. Jones, Ronald W & Engerman, Stanley L, 1996. "Trade, Technology, and Wages: A Tale of Two Countries," American Economic Review, American Economic Association, vol. 86(2), pages 35-40, May.
    11. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
    12. Sugata Marjit & Hamid Beladi & Avik Chakrabarti, 2004. "Trade and Wage Inequality in Developing Countries," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 295-303, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sugata Marjit & Anjan Mukherji & Sandip Sarkar, 2018. "Pareto Efficiency, Inequality and Distribution Neutral Fiscal Policy - An Overview," Discussion Papers Series 590, School of Economics, University of Queensland, Australia.
    2. Moses K. Tule & Taiwo Ajilore & Augustine Ujunwa, 2019. "Monetary Policy Contagion in the West African Monetary Zone," Foreign Trade Review, , vol. 54(4), pages 375-398, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sugata Marjit, 2016. "Anti-Trade Agitation and Distribution-Neutral Tax Policy- An Elementary Framework," Discussion Papers 2016-14, University of Nottingham, GEP.
    2. Sugata Marjit & Suryaprakash Mishra & Sandip Sarkar & Lei Yang, 2019. "Trade, Inequality and Distribution-neutral Fiscal Policy," Foreign Trade Review, , vol. 54(2), pages 61-74, May.
    3. Lukas Mohler & Rolf Weder & Simone Wyss, 2018. "International trade and unemployment: towards an investigation of the Swiss case," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 154(1), pages 1-12, December.
    4. Céline CARRERE & Marco FUGAZZA & Marcelo OLARREAGA & Frédéric ROBERT-NICOUD, 2014. "Trade in Unemployment," Working Papers P101, FERDI.
    5. J.Peter Neary, 2002. "Foreign Competition and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 680-693, November.
    6. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    7. Avraham Ebenstein & Ann Harrison & Margaret McMillan & Shannon Phillips, 2022. "Estimating The Impact Of Trade And Offshoring On American Workers Using The Current Population Surveys," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 12, pages 275-289, World Scientific Publishing Co. Pte. Ltd..
    8. Thomas Kemeny & David Rigby & Abigail Cooke, 2015. "Cheap Imports and the Loss of US Manufacturing Jobs," The World Economy, Wiley Blackwell, vol. 38(10), pages 1555-1573, October.
    9. Ajit Singh & Ann Zammit, 2019. "Globalisation, labour standards and economic development," Chapters, in: Jonathan Michie (ed.), The Handbook of Globalisation, Third Edition, chapter 12, pages 202-224, Edward Elgar Publishing.
    10. Susan Stone & Ricardo H. Cavazos Cepeda, 2011. "Wage Implications of Trade Liberalisation: Evidence for Effective Policy Formation," OECD Trade Policy Papers 122, OECD Publishing.
    11. repec:wsr:fiwspe:y:2012:i:003 is not listed on IDEAS
    12. Sabina Szymczak, 2023. "Systematic literature review: theory on GVCs' impact on wages, employment, and productivity," GUT FME Working Paper Series A 71, Faculty of Management and Economics, Gdansk University of Technology.
    13. Sabina Szymczak, 2024. "The impact of global value chains on wages, employment, and productivity: a survey of theoretical approaches," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 58(1), pages 1-25, December.
    14. Dumont, Michel, 2004. "The Impact of International Trade with Newly Industrialised Countries on the Wages and Employment of Low-Skilled and High-Skilled Workers in the European Union," Thesis Commons bmxag, Center for Open Science.
    15. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
    16. Hamid Beladi & Sugata Marjit & Reza Oladi, 2018. "Does protectionism harm unskilled workers?," Economics and Politics, Wiley Blackwell, vol. 30(3), pages 444-450, November.
    17. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    18. Schweinberger, Albert G., 2001. "Capital, heterogeneous labour, global goods markets and unemployment," Discussion Papers, Series I 309, University of Konstanz, Department of Economics.
    19. Chiquiar, Daniel & Covarrubias, Enrique & Salcedo, Alejandrina, 2016. "Labor market consequences of trade openness and competition in foreign markets," Conference papers 332760, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    20. Nathalie Chusseau & Joël Hellier, 2012. "Globalisation and Inequality: Where do we stand?," Journal of Income Distribution, Ad libros publications inc., vol. 21(3-4), pages 7-34, November.
    21. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.

    More about this item

    Keywords

    trade model; wage inequality; compensation mechanism; tax policy;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_6474. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.