Household Inequality, Social Welfare, and Trade

Joseph Francois and Hugo Rojas-Romagosa

No 7998, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Working with Sen social welfare functions (meaning explicit separability between mean income and income dispersion), we develop a generalized dual approach to tracking household inequality aspects of social welfare in general equilibrium. We highlight how household equity can be examined analytically alongside production efficiency in duality-based models, using our dual framework to explore potential trade-offs between efficiency and equity effects of trade policy. Our results complement the set of standard inequality results in trade theory focused on functional rather than household inequality. We also find that the relative distributional impact of tariffs on welfare is conditional on the initial level of inequality.

Keywords: Equity and welfare in general equilibrium; Equity in cge; Sen welfare functions; Trade and equity (search for similar items in EconPapers)
JEL-codes: D31 D72 F13 O15 (search for similar items in EconPapers)
Date: 2010-09
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Journal Article: Household inequality, social welfare, and trade (2011)
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