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Pareto Gains from Trade

Giovanni Facchini () and Gerald Willmann ()

Economia politica, 2001, issue 2, 207-216

Abstract: In this paper we review the literature on Pareto gains from trade. We start by discussing the distributional implications of trade which arise in the general heterogeneous agents case. We present the proof of Pareto gains from trade using lumpsum redistribution, followed by the same result with commodity taxation. Newer results involving non-linear taxation, in particular the special case of a duty free zone, are also discussed. Finally, we address the distributional effects of trade in the presence of increasing returns to scale and love of variety.

Date: 2001
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Economia politica is currently edited by Alberto Quadrio Curzio, Giorgio Lunghini, Pier Carlo Nicola

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