The Distributional Effects of Trade: Theory and Evidence from the United States

82 Pages Posted: 4 Nov 2018 Last revised: 17 Apr 2023

See all articles by Kirill Borusyak

Kirill Borusyak

University College London - Department of Economics

Xavier Jaravel

London School of Economics & Political Science (LSE) - Department of Economics

Date Written: April 17, 2023

Abstract

How much do consumption patterns matter for the impact of international trade on inequality? In neoclassical trade models, the effects of trade shocks on consumers' purchasing power are governed by the shares of imports in consumer expenditures, under no parametric assumptions on preferences and technology. This paper provides in-depth measurement of import shares across the income distribution in the United States, using new datasets linking expenditure and customs microdata. Contrary to common wisdom, we find that import shares are flat throughout the income distribution: the purchasing-power gains from lower trade costs are distributionally neutral.

Keywords: Trade liberalization, Distributional effects, Inequality, Non-homothetic preferences

JEL Classification: F14, F60, D63

Suggested Citation

Borusyak, Kirill and Jaravel, Xavier, The Distributional Effects of Trade: Theory and Evidence from the United States (April 17, 2023). Available at SSRN: https://ssrn.com/abstract=3269579 or http://dx.doi.org/10.2139/ssrn.3269579

Kirill Borusyak (Contact Author)

University College London - Department of Economics

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Xavier Jaravel

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
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United Kingdom
7456842728 (Phone)
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