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In this paper we build a model of trade in vertically differentiated products and find that income inequality can affect the demand for imports even in the presence of homothetic preferences. The empirical importance of changes in inequality on the demand for imports is then assessed by...
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theory. A model of life-cycle decisions with uncertain survival is used to derive individuals' consumption and chosen …. Population theory (e.g. Coale, 1952) is used to derive the steady-state population age density function, enabling the aggregation …
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effect on import demand. The estimation also yields some other expected results, viz. that the income and price elasticity of …
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