IDEAS home Printed from
   My bibliography  Save this paper

North-South Trade, Capital Accumulation and Personal Distribution of Wealth and Income


  • Satya P. Das


In recent years a lot of work has been done on the dynamics of personal distribution of wealth and income in a macro economy (e.g. Das (1993), Benabou (1996)). Similarities in the relative wages and personal distribution across countries have also been noted. While the issue of trade and relative wages has received considerable attention lately, how trade affects personal distribution of wealth and income is relatively unknown. The venerable Stolper-Samuelson theorem predicts the effects of trade policy on the wellbeing of workers and capitalists. The modern society is however quite different from the "classical" dichotomous industrial society consisting of a working class with little ownership of capital and capitalists without significant labor income. The transaction costs of acquiring and disposing assets are quite low today and we observe -- both in developed and developing countries -- a vast cross-section of "middle class" households having labor and nonlabor income from assets. Thus there is no monotonic link from functional to personal distribution. Extending along Das (1999 a, b), this paper develops a baseline, factor- endowment cum capital accumulation model of trade with heterogeneous households in terms of idiosyncratic preference shocks. It studies the effects of free trade in goods and loans on long-run capital stock, personal distribution and distributional mobility within a country. It is shown that in the North (capital-rich in the steady state compared to South), free trade in goods lowers the capital stock but increases the variance of capital holding across households. Thus wealth inequality, measured by the coefficient of variation, increases. Income and welfare inequalities also increase. Furthermore, wealth-income mobility goes down. The opposite implications hold in the South. With free trade in goods being the initial situation, free borrowing increases (decreases) the capital stock in the North (South). But inequality
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Satya P. Das, "undated". "North-South Trade, Capital Accumulation and Personal Distribution of Wealth and Income," EPRU Working Paper Series 99-16, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:epruwp:99-16

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    1. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 551-584.
    2. Andrew Atkeson & Robert E. Lucas, 1992. "On Efficient Distribution With Private Information," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 427-453.
    3. Lucas, Robert E, Jr, 1992. "On Efficiency and Distribution," Economic Journal, Royal Economic Society, vol. 102(411), pages 233-247, March.
    4. Atkinson, A B, 1997. "Bringing Income Distribution in from the Cold," Economic Journal, Royal Economic Society, vol. 107(441), pages 297-321, March.
    5. Bourguignon, F. & Morrisson, C., 1990. "Income distribution, development and foreign trade : A cross-sectional analysis," European Economic Review, Elsevier, vol. 34(6), pages 1113-1132, September.
    6. Philippe Aghion & Patrick Bolton, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 151-172.
    7. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
    8. Thomas Piketty, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 173-189.
    9. Hopenhayn, Hugo A & Prescott, Edward C, 1992. "Stochastic Monotonicity and Stationary Distributions for Dynamic Economies," Econometrica, Econometric Society, vol. 60(6), pages 1387-1406, November.
    10. Strawczynski, Michel, 1998. "Social insurance and the optimum piecewise linear income tax," Journal of Public Economics, Elsevier, vol. 69(3), pages 371-388, September.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    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:kud:epruwp:99-16. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.