North-South Trade, Capital Accumulation and Personal Distribution of Wealth and Income
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.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark|
Phone: (+45) 3532 4411
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk/epru/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hopenhayn, Hugo A & Prescott, Edward C, 1992. "Stochastic Monotonicity and Stationary Distributions for Dynamic Economies," Econometrica, Econometric Society, vol. 60(6), pages 1387-406, November.
- Lucas, Robert E, Jr, 1992. "On Efficiency and Distribution," Economic Journal, Royal Economic Society, vol. 102(411), pages 233-47, March.
- 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.
- Bourguignon, F. & Morrisson, C., 1989. "Income Distribution, Development and Foreign Trade: A Cross-Sectional Analysis," DELTA Working Papers 89-05, DELTA (Ecole normale supérieure).
- Thomas Piketty, 1994.
"Social Mobility and Redistributive Politics,"
94-15, Massachusetts Institute of Technology (MIT), Department of Economics.
- Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
- Atkinson, A B, 1997.
"Bringing Income Distribution in from the Cold,"
Royal Economic Society, vol. 107(441), pages 297-321, March.
- 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.
- 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.
- Andrew Atkeson & Robert E Lucas, 2010. "On Efficient Distribution with Private Information," Levine's Working Paper Archive 2179, David K. Levine.
- Strawczynski, Michel, 1998. "Social insurance and the optimum piecewise linear income tax," Journal of Public Economics, Elsevier, vol. 69(3), pages 371-388, September.
- 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.
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)
If references are entirely missing, you can add them using this form.