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Discussion Paper Details

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Title: Trade Policy and the Household Distribution of Income

Author(s): Joseph Francois and Hugo Rojas-Romagosa

Publication Date: June 2004

Keyword(s): atkinson index, distribution of income, gini coefficient, globalization, inequality, tariffs and trade

Programme Area(s): International Trade and Regional Economics

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 cross-country 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 labour-intensive diversification cones. This relationship shifts to one of falling inequality as incomes rise and we move to capital-intensive diversification cones.

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Bibliographic Reference

Francois, J and Rojas-Romagosa, H. 2004. 'Trade Policy and the Household Distribution of Income'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4436