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Consumer Heterogeneity, Free Trade, and the Welfare Impact of Income Redistribution
Author(s) -
Ju Jiandong
Publication year - 2011
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2011.00947.x
Subject(s) - economics , redistribution (election) , welfare , redistribution of income and wealth , distribution (mathematics) , trade volume , income distribution , consumer welfare , international economics , labour economics , microeconomics , inequality , market economy , public good , mathematical analysis , mathematics , politics , political science , law
Demographic differences, like young and elderly, and healthy and disabled, are summarized as consumers' heterogeneity in expenditure shares, and introduced into an otherwise standard Heckscher–Ohlin model, together with income distribution in this paper. We prove that free trade may hurt consumers who spend more on the exporting good if the volume of trade is small, while redistributing more income to consumers who spend more on the exporting good may make everyone in the country better off. By contrast, redistributing more income to consumers who spend more on the importing good may make everyone in the country worse off.