6533b82bfe1ef96bd128e134

RESEARCH PRODUCT

Redistribution, selection, and trade

Miriam Kohl

subject

Economics and EconometricsLabour economicsGeneral equilibrium theoryCeteris paribusH24H25International tradeInternational trade Income inequality Redistribution Heterogeneous firmsTax rateEconomic inequalityIncome tax0502 economics and businessEconomicsddc:330F12050207 economicsIncome inequalityD31050205 econometrics 05 social sciencesF16Internationaler Handel Einkommensungleichheit Umverteilung Heterogene FirmenWelfare stateRedistribution (cultural anthropology)Per capita incomeHeterogeneous firmsVolkswirtschaftslehreRedistributionF68Finance

description

Abstract This paper examines the distributional effects of international trade in a general equilibrium model with heterogeneous agents and a welfare state redistributing income. The redistribution scheme is financed by a progressive income tax and gives the same absolute transfer to all individuals. Ceteris paribus, international trade leads to an increase in income per capita but also to higher income inequality on two fronts. Inter-group inequality between managers and workers increases, and intra-group inequality within the group of managers goes up as well. We show that for a given tax rate, there is an endogenous increase in the size of the welfare state that works against the increase in inequality, yet cannot offset it. The paper also sheds light on the conditions under which trade can actually lead to a Pareto improvement.

yearjournalcountryeditionlanguage
2017-10-06
https://hdl.handle.net/10419/168575