The authors analyze general equilibrium relationships between trade policy and the household distribution of income, decomposing social welfare into real income level and variance components and emphasizing Gini and Atkinson indexes. They 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 within a broad general equilibrium framework. In addition, the authors can separate the efficiency and equity effects of tariffs on welfare. They then examine endogenous tariff formation when policymakers care about both equity and special interests.
Details
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Author
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Document Date
2005/10/01
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Document Type
Policy Research Working Paper
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Report Number
WPS3731
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2010/07/01
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Disclosure Status
Disclosed
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Doc Name
Equity, welfare, and the setting of trade policy in general equilibrium
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Keywords
social welfare function;import protection;general equilibrium;general equilibrium trade model;terms of trade effect;marginal utility of income;positive optimum tariff rate;general equilibrium system;context of trade policy;marginal cost of funds;impact of trade;Trade Policies;composite consumption good;endogenous tariff formation;functional distribution;household distribution;neoclassical production function;effect of trade;share of income;real income;inequality effect;inequality index;change in income;socially optimum tariff;distribution of ownership;allocation of asset;global production sharing;ownership of land;average income level;political economy model;free trade lobbying;degree of inequality;inequality and growth;perfectly competitive market;net welfare effect;form of sector;index of inequality;inequality and trade;cost of living;aggregate social welfare;consumer price index;impact of inequality;redistribution of income;general equilibrium framework;measurement of inequality;Applied General Equilibrium;standard trade models;interests of owner;real national income;measure of inequality;cambridge university press;inequality of income;special interest;skilled labor;tariff revenue;household income;ownership matrix;high tariff;tariff change;small country;income share;functional form;income inequality;factor income;political support;capital-abundant country;inequality measure;capital owner;efficiency loss;utility function;factor price;household utility;asset income;
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Citation
Francois,Joseph Rojas Romagosa,Hugo Alexander
Equity, welfare, and the setting of trade policy in general equilibrium (English). Policy, Research working paper ; no. WPS 3731 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/875011468182048527/Equity-welfare-and-the-setting-of-trade-policy-in-general-equilibrium