TY - JOUR
T1 - On the distributional effects of trade policy
T2 - Dynamics of household saving and asset prices
AU - San Vicente Portes, Luis
PY - 2009/8
Y1 - 2009/8
N2 - This paper studies the effect of trade liberalization on inequality. We develop a theoretical framework that generates economy-wide distributions of wealth and income for different levels of trade protection. The model unambiguously determines the effect of liberalization on inequality; and rationalizes why larger inequality can be the outcome of a welfare enhancing policy, as households reduce their buffer savings when liberalization lowers the price of food. The framework reconciles the increase in inequality, the fall in the value of land, and farmers' opposition to freer trade, that have featured in different liberalization episodes. We also present empirical support for the model's predictions.
AB - This paper studies the effect of trade liberalization on inequality. We develop a theoretical framework that generates economy-wide distributions of wealth and income for different levels of trade protection. The model unambiguously determines the effect of liberalization on inequality; and rationalizes why larger inequality can be the outcome of a welfare enhancing policy, as households reduce their buffer savings when liberalization lowers the price of food. The framework reconciles the increase in inequality, the fall in the value of land, and farmers' opposition to freer trade, that have featured in different liberalization episodes. We also present empirical support for the model's predictions.
KW - Agriculture
KW - Heterogeneous agents
KW - Inequality
KW - Trade liberalization
KW - Trade policy
UR - http://www.scopus.com/inward/record.url?scp=67649682999&partnerID=8YFLogxK
U2 - 10.1016/j.qref.2008.10.001
DO - 10.1016/j.qref.2008.10.001
M3 - Article
AN - SCOPUS:67649682999
SN - 1062-9769
VL - 49
SP - 944
EP - 970
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
IS - 3
ER -
