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Trade policy and redistribution when preferences are non-homothetic

Author

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  • Do,Quy-Toan
  • Levchenko,Andrei A.

Abstract

This paper compares redistribution through trade restrictions versus domestic lump-sum transfers. When preferences are non-homothetic, even domestic lump-sum transfers affect relative prices. Thus, contrary to the conventional wisdom, domestic lump-sum transfers are not necessarily superior to distortionary trade policy. The paper develops this argument in the context of the food export bans imposed by many developing countries in the late 2000s.

Suggested Citation

  • Do,Quy-Toan & Levchenko,Andrei A., 2017. "Trade policy and redistribution when preferences are non-homothetic," Policy Research Working Paper Series 8005, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8005
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    Cited by:

    1. Santiago Camara, 2022. "TANK meets Diaz-Alejandro: Household heterogeneity, non-homothetic preferences & policy design," Papers 2201.02916, arXiv.org.
    2. Dainauskas, Justas, 2024. "The network origins of trade comovement," Journal of International Economics, Elsevier, vol. 152(C).

    More about this item

    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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