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Income distribution and unequal gains from trade
This paper studies welfare gains from trade in a tractable model with a nonhomothetic preference over product quality. We show that the welfare changes due to trade shocks are unequal across consumers and derive a parsimonious formula to measure these welfare changes as in Arkolakis et al. (2012, American Economic Review, 102, 94–130). We find that the welfare changes are larger for consumers with lower income. Moreover, this paper shows that the welfare implications are different between a change in (iceberg-type) variable trade cost and a change in tariff when tariff revenue matters. More importantly, we show that the difference varies across consumers with different income levels.
National Social Science Foundation of China (No.20AJY014)
Key Project of Philosophy and Social Science Foundation of Jiangsu Province (No.20EYA002)
Key Project of Philosophy and Social Science Research in Colleges and Universities of Jiangsu Province (No.2018SJZDA011)
- Business and Economics
Published inThe World Economy
- AM (Accepted Manuscript)
Rights holder© John Wiley & Sons Ltd
Publisher statementThis is the peer reviewed version of the following article: Gao, B., & Qiu, B. (2022). Income distribution and unequal gains from trade. Gao, B., & Qiu, B. (2023). Income distribution and unequal gains from trade. The World Economy, 46, 236– 255. https://doi.org/10.1111/twec.13271, which has been published in final form at https://doi.org/10.1111/twec.13271. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.