Income Inequality, Productivity, and International Trade

Wen-Tai Hsu, Lin Lu () and Pierre Picard
Additional contact information
Lin Lu: Department of Economics, Tsinghua University

No 13-2018, Economics and Statistics Working Papers from Singapore Management University, School of Economics

Abstract: This paper discusses the effect of income inequality on selection and aggregate productivity in a general equilibrium model with non-homothetic preferences. It shows the existence of a negative relationship between the number and quantity of products consumed by an income group and the earnings of other income groups. It also highlights the negative effect of a mean-preserving spread of income on aggregate productivity through the softening of firms’ selection. This effect is however mitigated in the presence of international trade. In a quantitative analysis, it is shown that an excessively large mean-preserving spread of income may harm the rich as it raises firms’ markups on their purchases. This is contrary to the general belief that income inequality benefits the rich.

Pages: 48 pages
Date: 2018-07-11
New Economics Papers: this item is included in nep-int and nep-sea
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ink.library.smu.edu.sg/soe_research/2188/ Full text (application/pdf)

Related works:
Journal Article: Income inequality, productivity, and international trade (2023)
Working Paper: Income Inequality, Productivity, and International Trade (2021)
Working Paper: Income Inequality, Productivity, and International Trade (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:smuesw:2018_013

Access Statistics for this paper

More papers in Economics and Statistics Working Papers from Singapore Management University, School of Economics 90 Stamford Road, Sigapore 178903. Contact information at EDIRC.
Bibliographic data for series maintained by Cheong Pei Qi ( this e-mail address is bad, please contact ).