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Trade Policy and Redistribution when Preferences are Non-Homothetic

Quy-Toan Do () and Andrei Levchenko

No 11890, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We compare redistribution through trade restrictions vs. domestic lump-sum transfers. When preferences are non-homothetic, even domestic lump-sum transfers affect relative prices. Thus, contrary to the conventional wisdom, domestic lump-sum transfers are not necessarily superior to distortionary trade policy. We develop this argument in the context of food export bans imposed by many developing countries in the late 2000s.

Keywords: non-homothetic preferences; redistribution; trade restrictions (search for similar items in EconPapers)
JEL-codes: F13 O24 Q17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2017-03
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Working Paper: Trade Policy and Redistribution when Preferences are Non-Homothetic (2017) Downloads
Working Paper: Trade policy and redistribution when preferences are non-homothetic (2017) Downloads
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