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Market Imperfections, Wealth Inequality, and the Distribution of Trade Gains

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  • Manuel Oechslin
  • Reto Foellmi

Abstract

We explore the role of the ownership structure of capital in an economy that suffers from barriers to entry and an imperfect financial system. In such an environment, an unequal distribution of capital provides an explanation for trade flows and trade gains even when countries do not differ in relative factor endowments or available technologies. Moreover, an uneven asset distribution is associated with a large import-competing sector and only a small number of export-oriented entrepreneurs. Along these lines, we suggest that an unequal asset distribution may be key to understand why still many less developed countries protect their firms from foreign competition.

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  • Manuel Oechslin & Reto Foellmi, 2006. "Market Imperfections, Wealth Inequality, and the Distribution of Trade Gains," IEW - Working Papers 266, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:266
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    More about this item

    Keywords

    inequality; trade policy; economic development;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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