Munich Personal RePEc Archive

Inequality, status effects and trade

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

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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.

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