Inequality and trade

Devashish Mitra

92 citations0/0 files storedCanadian Journal of Economics/Revue canadienne d économique

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Global trade and economics Economic Theory and Policy Global Trade and Competitiveness

Abstract

Abstract. We incorporate demand‐side considerations in trade in a systematic but straightforward way. We do so by focusing on the role of inequality in the determination of trade flows and patterns. With non‐homothetic preferences, when countries are similar in all respects but asset inequality, we find that trade is driven by specialization in consumption, not production. Besides, these assumptions allow us to generate some interesting international spillover effects of redistributive policies. Finally, we study a model of monopolistic competition and find a novel V‐shaped relationship between the ratio of inter‐industry to intra‐industry trade and a country's inequality. JEL classification: F11, F12

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References

2003Gravity with Gravitas: A Solution to the Border Puzzle 1979Increasing returns, monopolistic competition, and international trade 2014National and International Returns to Scale in the Modern Theory of International Trade 1985Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition and the International Economy 1964An Essay on Trade and Transformation.2004Advanced International Trade : Theory and Evidence Ed. 2 1981International trade in the presence of product differentiation, economies of scale and monopolistic competition 1995The Case of the Missing Trade and Other Mysteries

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