Income Inequality, International Trade and Firm Location

Richard Chisik and Nazanin Behzadan

No 81, Working Papers from Toronto Metropolitan University, Department of Economics

Abstract: In this paper we analyze the effect of within-country income inequality on economic outcomes. We develop a new model of international trade with non-homothetic preferences whereby within-country income distribution affects firm location decisions. In a two-country, three-sector framework with increasing returns to scale and positive trade costs we show that an increase in income inequality can generate firm movement to the country with a more equal income distribution.

Date: 2021-12
New Economics Papers: this item is included in nep-int
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Journal Article: Income inequality, international trade and firm location (2022)
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