An adverse social welfare effect of a doubly gainful trade
Wilhelm Kohler and
No 106, University of Tuebingen Working Papers in Economics and Finance from University of Tuebingen, Faculty of Economics and Social Sciences
Acknowledging individuals' distaste for low relative income renders trade less appealing when trade is viewed as a technology that integrates economies by merging separate social spheres into one. We define a "trembling trade" as a situation in which gains from trade are overtaken by losses of relative income, with the result that global social welfare is reduced. A constructive example reveals that a "trembling trade" can arise even when trade is doubly gainful in that it increases the income of every individual and narrows the income gap between the trading populations.
Keywords: Gains from trade; Increase of incomes; Decrease of income gap; Integration; Change of social space; Low relative income; Social welfare (search for similar items in EconPapers)
JEL-codes: D31 D63 R12 (search for similar items in EconPapers)
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Journal Article: An adverse social welfare effect of a doubly gainful trade (2018)
Working Paper: An adverse social welfare effect of a doubly gainful trade (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuewef:106
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