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The redistribution of trade gains and the equity-efficiency trade-of

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  • Marco de Pinto

    () (University of Trier)

Abstract

The contribution of this paper is to derive an optimal redistribution scheme for trade gains in the case of a governments objective function that explicitly accounts for the equity-efficiency trade-o¤. The government pays unemployment benefits (UB) either .financed by a wage tax, a payroll tax or a pro.t tax paid by exporters only. Using a Melitz -type framework with unionized labor markets and heterogeneous workers we show that there is a clear-cut ranking of the redistribution schemes in terms of welfare level: 1. UB .financed by a pro.t tax paid by exporters, 2. UB .financed by a wage tax, 3. UB .financed by a payroll tax.

Suggested Citation

  • Marco de Pinto, 2012. "The redistribution of trade gains and the equity-efficiency trade-of," MAGKS Papers on Economics 201244, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  • Handle: RePEc:mar:magkse:201244
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    File URL: https://www.uni-marburg.de/fb02/makro/forschung/magkspapers/44-2012_de_pinto.pdf
    File Function: First version, 2012
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    More about this item

    Keywords

    trade liberalization; heterogeneous firms; trade unions; income inequality; unemployment benefits; taxes;

    JEL classification:

    • F1 - International Economics - - Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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