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Household Inequality, Welfare and the Setting of Trade Policy

Joseph Francois and Hugo Rojas-Romagosa ()

No 4624, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyse general equilibrium relationships between trade policy and the household distribution of income, decomposing social welfare into real income level and variance components through Gini and Atkinson indexes. We 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 in Heckscher-Ohlin and Ricardo-Viner frameworks. In addition, we can separate the efficiency and equity effects of tariffs on welfare. We then examine endogenous tariff formation when policy makers care about both equity and special interests.

Keywords: Atkinson index; Gini index; household distribution of income; political economy; trade policy (search for similar items in EconPapers)
JEL-codes: D31 D72 F13 O15 (search for similar items in EconPapers)
Date: 2004-09
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Working Paper: Household Inequality, Welfare, and the Setting of Trade Policy (2005) Downloads
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