How does a redistribution of trade gains affect welfare when income inequality matters? To answer this question, we extend the [1] model to unionized labor markets and heterogeneous workers. As redistribution schemes, we consider unemployment benefits that are financed either by a wage tax, a...

We use a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to analyze economic policy meant to compensate the losers of trade liberalization and reduce the ensuing wage inequality. We consider several...

This paper characterizes the trade-off between the income gains and the inequality costs of trade using survey data for 54 developing countries. Tariff data on agricultural and manufacturing goods are combined with household survey data on detailed income and expenditure patterns to estimate the...

There is strong evidence that different income groups consume different bundles of goods. This evidence suggests that trade liberalization can affect welfare inequality within a country via changes in the relative prices of goods consumed by different income groups (the price effect). In this...