Discussion Paper Details

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Title: Household Inequality, Social Welfare, and Trade

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

Publication Date: September 2010

Keyword(s): equity and welfare in general equilibrium, equity in CGE, Sen welfare functions and trade and equity

Programme Area(s): International Trade and Regional Economics

Abstract: Working with Sen social welfare functions (meaning explicit separability between mean income and income dispersion), we develop a generalized dual approach to tracking household inequality aspects of social welfare in general equilibrium. We highlight how household equity can be examined analytically alongside production efficiency in duality-based models, using our dual framework to explore potential trade-offs between efficiency and equity effects of trade policy. Our results complement the set of standard inequality results in trade theory focused on functional rather than household inequality. We also find that the relative distributional impact of tariffs on welfare is conditional on the initial level of inequality.

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Bibliographic Reference

Francois, J and Rojas-Romagosa, H. 2010. 'Household Inequality, Social Welfare, and Trade'. London, Centre for Economic Policy Research.