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Household Inequality, Social Welfare, and Trade

  • Francois, Joseph
  • Rojas-Romagosa, Hugo

Working with Sen social welfare functions (meaning explicit separability between mean income and income dispersion), we develop a generalized dual approach to tracking household inequality aspects of social welfare in general equilibrium. We highlight how household equity can be examined analytically alongside production efficiency in duality-based models, using our dual framework to explore potential trade-offs between efficiency and equity effects of trade policy. Our results complement the set of standard inequality results in trade theory focused on functional rather than household inequality. We also find that the relative distributional impact of tariffs on welfare is conditional on the initial level of inequality.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7998.

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Date of creation: Sep 2010
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Handle: RePEc:cpr:ceprdp:7998
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