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Trade Policy and the Household Distribution of Income

  • Francois, Joseph
  • Rojas-Romagosa, Hugo

We explore the relationship between import protection and the household distribution of income. We first develop a general-equilibrium mapping from tariffs to household inequality measures. This also yields predictions for linkages between tariffs, development level, and observed household inequality. Working with a new dataset, we then examine cross-country variation in inequality with respect to import protection. Results are consistent with predictions of the factor-intensity model of trade. Regression results suggest that import protection makes income distribution worse for countries in labour-intensive diversification cones. This relationship shifts to one of falling inequality as incomes rise and we move to capital-intensive diversification cones.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4436.

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Date of creation: Jun 2004
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Handle: RePEc:cpr:ceprdp:4436
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