Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2004-08-17
Number: 04-086/2
Author-Name: Joseph Francois
Author-Email: francois@few.eur.nl
Author-Workplace-Name: Faculty of Economics, Erasmus Universiteit Rotterdam
Author-Name: Hugo Rojas-Romagosa
Author-Email: rojas-romagosa@tinbergen.nl
Author-Workplace-Name: Faculty of Economics, Erasmus Universiteit Rotterdam
Title: Household Inequality, Welfare, and the Setting of Trade Policy
Abstract: We analyze 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.
Classification-JEL: F13; O15; D31; D72
Keywords: trade policy; household distribution of income; Atkinson index; Gini index; endogenous tariffs; tariffs and equity
File-Url: https://papers.tinbergen.nl/04086.pdf
File-Format: application/pdf
File-Size: 544261 bytes
Handle: RePEc:tin:wpaper:20040086