Redistribution, Selection, and Trade

Konferenzbeitrag

This paper examines the distributional effects of international trade in a general equilibrium model with heterogeneous agents and a welfare state redistributing income. The redistribution scheme is financed by a progressive income tax and gives the same absolute transfer to all individuals. Ceteris paribus, international trade leads to an increase in income per capita but also to higher income inequality on two fronts. Inter-group inequality between managers and workers increases, and intra-group inequality within the group of managers goes up as well. We show that for a given tax rate, there is an endogenous increase in the size of the welfare state that works against the increase in inequality, yet cannot offset it. The paper also sheds light on the conditions under which trade can actually lead to a Pareto improvement.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: International Trade II ; No. C12-V1

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Trade and Labor Market Interactions ; Economic Impacts of Globalization: Policy
• Subject: International trade ; Income inequality ; Redistribution ; Heterogeneous firms

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kohl, Miriam
• Event: Veröffentlichung
• (who): ZBW - Leibniz-Informationszentrum Wirtschaft
• (where): Kiel, Hamburg
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/181538
• Last update: 10.03.2025, 11:42 AM CET