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Equity, welfare, and the setting of trade policy in general equilibrium, Volume 1
Author:Francois, Joseph; Rojas-Romagosa, Hugo ; Country:World;
Date Stored:2005/09/28Document Date:2005/10/01
Document Type:Policy Research Working PaperSubTopics:Economic Theory & Research; Free Trade; Inequality; Poverty Impact Evaluation; Investment and Investment Climate
Language:EnglishRegion:The World Region
Report Number:WPS3731Collection Title:Policy, Research working paper ; no. WPS 3731
Volume No:1  

Summary: The authors analyze general equilibrium relationships between trade policy and the household distribution of income, decomposing social welfare into real income level and variance components and emphasizing Gini and Atkinson indexes. They embed these inequality-adjusted social welfare functions in a general equilibrium structure mapping from tariff protection to household inequality. This yields predictions regarding the linkages between trade protection, country characteristics, and inequality within a broad general equilibrium framework. In addition, the authors can separate the efficiency and equity effects of tariffs on welfare. They then examine endogenous tariff formation when policymakers care about both equity and special interests.

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