Timing of trade liberalization |
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Authors: | Ryuichi Tanaka |
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Institution: | 1. Graduate School of Information Science and Engineering , Tokyo Institute of Technology , Japan tanaka@mei.titech.ac.jp |
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Abstract: | Abstract This paper studies the effects of trade liberalization on growth and long-run global income inequality using a two-country model of human capital accumulation by credit-constrained households. I show that the timing of trade liberalization is a crucial determinant of its effects on growth. Moreover, I show that the size of the long-run income gap between the two countries depends on the difference in domestic income inequality when they open up to trade. Based on these results, I analyze the effects of redistributive policy within a country. I show that redistribution in one country may increase income per capita of its trading partner if it is undertaken in a steady state, while the opposite is true if the policy is undertaken during transition. |
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Keywords: | Income inequality international trade world income distribution international policy transmission |
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