Inequality, status effects and trade

Marjit, Sugata and Roychowdhury, Punarjit (2012): Inequality, status effects and trade.

Abstract

In this paper we attempt to examine the role of social inequality and status effects in driving trade between two countries which differ systematically only in terms of income-distribution using a status-driven model of consumption involving a status and a non-status good. Our model illustrates that when trade opens up, the country characterized by a higher level of inequality is likely to export the non-status good to the country characterized by a lower level of inequality, thus, establishing the extent of inequality as a determining factor behind comparative advantage.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inequality; Status effects; Trade
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade; D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles

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