Trade Policy and the Household Distribution of Income

Tinbergen Institute Discussion Paper No. 2004-051/2

27 Pages Posted: 5 May 2004

See all articles by Joseph F. Francois

Joseph F. Francois

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR); Vienna Institute of International Economic Studies (WIIW); University of Adelaide - School of Economics

Hugo Rojas-Romagosa

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

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Abstract

We explore the relationship between import protection and the household distribution of income. We first develop a general-equilibrium mapping from tariffs to household inequality measures. This also yields predictions for linkages between tariffs, development level, and observed household inequality. Working with a new dataset, we then examine crosscountry variation in inequality with respect to import protection. Results are consistent with predictions of the factor-intensity model of trade. Regression results suggest that import protection makes income distribution worse for countries in labor-intensive diversification cones. This relationship shifts to one of falling inequality as incomes rise and we move to capital-intensive diversification cones.

Keywords: trade, inequality, distribution of income, Atkinson index, Gini coefficient, globalization, tariffs

JEL Classification: F13, D31, O15

Suggested Citation

Francois, Joseph F and Rojas-Romagosa, Hugo, Trade Policy and the Household Distribution of Income. Tinbergen Institute Discussion Paper No. 2004-051/2. Available at SSRN: https://ssrn.com/abstract=539522 or http://dx.doi.org/10.2139/ssrn.539522

Joseph F Francois (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vienna Institute of International Economic Studies (WIIW) ( email )

Oppolzergasse 6
A-1010 Vienna
Austria

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 5540 (Phone)
+61 8 8223 1460 (Fax)

Hugo Rojas-Romagosa

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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