DP4436 Trade Policy and the Household Distribution of Income
|Author(s):||Joseph Francois, Hugo Rojas-Romagosa|
|Publication Date:||June 2004|
|Keyword(s):||atkinson index, distribution of income, gini coefficient, globalization, inequality, tariffs, trade|
|JEL(s):||D31, F13, O15|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=4436|
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.