Household Inequality, Welfare, and the Setting of Trade Policy
August 2004
Research Paper
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We analyze general equilibrium relationships between trade policy and the household distribution of income, decomposing social welfare into real income level and variance components through Gini and Atkinson indexes. We embed these inequality-adjusted social welfare functions in a general equilibrium structure mapping from tariff protection to household inequality. This yields predictions regarding the linkages between trade protection, country characteristics and inequality in Heckscher-Ohlin and Ricardo-Viner frameworks. In addition, we can separate the efficiency and equity effects of tariffs on welfare. We then examine endogenous tariff formation when policy makers care about both equity and special interests.
Keywords
- trade policy
- Atkinson index
- Gini index
- endogenous tariffs
- household distribution of income
- tariffs and equity
Classifications using
Journal of Economic Literature (JEL) Classification System
- D72 : Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior
- D31 : Personal Income, Wealth, and Their Distributions
- O15 : Human Resources; Human Development; Income Distribution; Migration
- F13 : Commercial Policy; Protection; Promotion; Trade Negotiations; International Organizations
Automatically Extracted Terms
- income
- tariff
- inequality
- welfare
- function
- effect
- equation
- trade
- distribution
- household
- welfare function
- country
- protection
- index
- impact
- equilibrium
- import protection
- model
- policy
- capital
