Inequality, status effects and trade
In this paper we attempt to examine the role of social inequality and status effects in driving trade between two countries which differ systematically only in terms of income-distribution using a status-driven model of consumption involving a status and a non-status good. Our model illustrates that when trade opens up, the country characterized by a higher level of inequality is likely to export the non-status good to the country characterized by a lower level of inequality, thus, establishing the extent of inequality as a determining factor behind comparative advantage.
|Date of creation:||22 Jul 2012|
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