Trade Policy and Redistribution When Preferences are Non-Homothetic

15 Pages Posted: 19 Mar 2017

See all articles by Quy-Toan Do

Quy-Toan Do

World Bank - Development Research Group (DECRG)

Andrei A. Levchenko

University of Michigan - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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Date Written: March 2017

Abstract

We compare redistribution through trade restrictions vs. 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. We develop this argument in the context of food export bans imposed by many developing countries in the late 2000s.

Suggested Citation

Do, Quy Toan and Levchenko, Andrei A., Trade Policy and Redistribution When Preferences are Non-Homothetic (March 2017). NBER Working Paper No. w23237. Available at SSRN: https://ssrn.com/abstract=2935442

Quy Toan Do (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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Andrei A. Levchenko

University of Michigan - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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