Inequality as a Determinant of Comparative Advantage
نویسنده
چکیده
This paper investigates the link between domestic income inequality and international trade using a dynamic model of occupational choice. After showing how systematic patterns of comparative advantage arise among countries with no di®erences in their economic fundamentals, I provide two results regarding trade liberalization describing the full transition dynamics. First, international income di®erences are reduced thanks to trade but both domestic and international income inequality persist in a steady state under trade. Secondly, the developing opening economy is better o® by establishing trade agreements with a richer economy that has, at the same time, a highly unequal income distribution. JEL classi ̄cation: F11, F15, J24, O11, O15
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