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Trade Effects on the Personal Distribution of Wealth

Author

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  • Francesc Obiols-Homs

    () (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

Abstract

This paper develops a dynamic Heckscher-Ohlin model and studies the interaction between international trade and wealth distribution dynamics. I also study how differences in the cost of financial intermediation among countries may affect the pattern of trade and wealth dynamics. Relative to the inequality it would have prevailed under autarky, I find that trade promotes a decline (an increase) in inequality when the economy converges to the steady state form below (above). However, with trade inequality increases (declines) during the transition from below (above). I also find that trade may alleviate frictions in the financial intermediation sector in economies where these frictions are larger. In those economies, trade may in fact promote a higher income than under autarky.

Suggested Citation

  • Francesc Obiols-Homs, 2002. "Trade Effects on the Personal Distribution of Wealth," Working Papers 0208, Centro de Investigacion Economica, ITAM.
  • Handle: RePEc:cie:wpaper:0208
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    File URL: http://ftp.itam.mx/pub/academico/inves/obiols/02-08.pdf
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    References listed on IDEAS

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    1. Wei, Shang-Jin & Wu, Yi, 2001. "Globalization and Inequality: Evidence from within China," CEPR Discussion Papers 3088, C.E.P.R. Discussion Papers.
    2. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
    3. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-397, July.
    4. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
    5. Marcet, Albert & Marimon, Ramon, 1992. "Communication, commitment, and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 219-249, December.
    6. Gerhard Sorger, 2000. "Income and wealth distribution in a simple model of growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(1), pages 23-42.
    7. Daron Acemoglu & Jaume Ventura, 2002. "The World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 659-694.
    8. Andrew Atkeson & Patrick J. Kehoe, 2000. "Paths of development for early- and late-bloomers in a dynamic Heckscher-Ohlin model," Staff Report 256, Federal Reserve Bank of Minneapolis.
    9. Jaume Ventura & Francesco Caselli, 2000. "A Representative Consumer Theory of Distribution," American Economic Review, American Economic Association, vol. 90(4), pages 909-926, September.
    10. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
    11. Ronald D. Fischer & Pablo Serra, 1996. "Income Inequality and Choice of Free Trade in a Model of Intraindustry Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 41-64.
    12. Bruce D. Smith, 2003. "Taking intermediation seriously," Proceedings, Federal Reserve Bank of Cleveland, pages 1319-1377.
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    Citations

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    Cited by:

    1. Claustre Bajona & Timothy Kehoe, 2010. "Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 487-513, July.
    2. Claustre Bajona & Timothy J. Kehoe, 2006. "Demographics in dynamic Heckscher-Ohlin models: overlapping generations versus infinitely lived consumers," Staff Report 377, Federal Reserve Bank of Minneapolis.

    More about this item

    Keywords

    International Trade; Wealth Distribution; Financial Intermediation;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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