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A note on quantitative trade restrictions, income effects and wage inequality

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  • Acharyya, Rajat

Abstract

This paper examines the effects of conversion of one type of physical trade restrictions into another on the intra-country wage inequality in a standard 2×2×2 Heckscher–Ohlin–Samuelson model. It shows that a conversion of an import-quota into an equivalent voluntary export restraint raises wage-inequality in the country importing the unskilled-labor intensive good and lowers the wage-inequality in its trading partner. This result does not depend on whether the unskilled-labor intensive good or the skilled-labor intensive good was initially subject to an import quota. Conversion of the import-quota into an equivalent import tariff, on the other hand, may lead to a rise in wage inequality in both countries. The driving force behind these results is the real income effect that conversion of one type trade restriction instrument into another results in.

Suggested Citation

  • Acharyya, Rajat, 2011. "A note on quantitative trade restrictions, income effects and wage inequality," Economic Modelling, Elsevier, vol. 28(6), pages 2628-2633.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:6:p:2628-2633
    DOI: 10.1016/j.econmod.2011.07.020
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    References listed on IDEAS

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    Cited by:

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    3. Xiang Li & Dan Su, 2021. "Does Capital Account Liberalization Affect Income Inequality?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(2), pages 377-410, April.
    4. Asteriou, Dimitrios & Dimelis, Sophia & Moudatsou, Argiro, 2014. "Globalization and income inequality: A panel data econometric approach for the EU27 countries," Economic Modelling, Elsevier, vol. 36(C), pages 592-599.
    5. Werner Kristjanpoller & Rocío Contreras, 2017. "Globalization and income inequality: evidence for Latin America," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 87, pages 9-33, Julio - D.
    6. Zare , Roohollah, 2019. "Globalization and Income Inequality: Does the Level of Financial Development Matter?," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 14(2), pages 159-175, April.
    7. Kristjanpoller Rodríguez, Werner & Contreras Collantes, Rocío, 2017. "Globalización y desigualdad: evidencia en América Latina," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 87, pages 9-33, March.

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    More about this item

    Keywords

    Heckscher-Ohlin-Samuelson model; Wage inequality; Import Quota; Voluntary Export Restraint; Tariff;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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