Trade, Knowledge and Income Distribution

Abstract

This thesis consists of four independent essays which address two main areas of research. The first area deals with the role of income distribution in economic transactions. The first paper in the thesis, Knowing me, Knowing you, suggests a new method of incorporating income distribution into international trade analysis. The method suggested provides a way to compare the distribution of income between two countries, and this is used to proxy demand similarities between the countries in question. The article Income Distribution and the diffusion of networks analyzes the impact of income distribution on the diffusion of fixed telecommunications in Brazil by showing how income distribution affects aggregate demand. The second line of research has to do with the impact of information on international trade. Insufficient information generates transaction costs, and in order to reduce costs it may be preferable to trade with known partners. The article Everybody knows? focuses on news flows as an explanatory variable in trade models. The determinants of news flows are estimated in a gravity model and subsequently in a structural equation model of international trade. The results suggest that information flow is an important determinant of international trade, but that traditional variables used in gravity models, such as income level and distance, also can be interpreted as taking information into account. Finally, the chapter Stranger in a strange land addresses the effects of international migration on explaining international trade patterns. The results reveal that immigration to Sweden has had a positive and robust effect on Swedish exports.

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