Income Distribution and Trade Pattern

  • 1 Department of Applied Economics, Utah State University, 4835 Old Main Hill, Logan, USA
  • 2 Indian Institute of Foreign Trade, Kolkata, India
  • 3 Business School, University of Nottingham, Nottingham, UK
Sugata Marjit, Reza Oladi
  • Corresponding author
  • Department of Applied Economics, Utah State University, 4835 Old Main Hill, Logan, Utah, USA
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and Punarjit Roychowdhury

Abstract

Motivated by recent insights from behavioral economics and social psychology, we present a theory of trade that seeks to explain inter-industry trade between countries that are similar in their production sides, but differ in their income distribution. By assuming status-dependent preferences that are non-homothetic, we show that income inequality differential can be a basis for inter-industry trade between otherwise similar economies.

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The Review of Economics (Jahrbuch für Wirtschaftswissenschaften) is a peer-reviewed general interest journal publishing articles from all fields of economics with a strong policy focus. The journal aims to provide a forum for policy contributions and to influence the public debate.

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