Equity, welfare, and the setting of trade policy in general equilibrium

Joseph Francois () and Hugo Rojas-Romagosa ()

No 3731, Policy Research Working Paper Series from The World Bank

Abstract: The authors analyze general equilibrium relationships between trade policy and the household distribution of income, decomposing social welfare into real income level and variance components and emphasizing Gini and Atkinson indexes. They 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 within a broad general equilibrium framework. In addition, the authors can separate the efficiency and equity effects of tariffs on welfare. They then examine endogenous tariff formation when policymakers care about both equity and special interests.

Keywords: Economic Theory&Research; Inequality; Free Trade; Poverty Impact Evaluation; Investment and Investment Climate (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: Written 2005-10-01
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