Inequality, nonhomothetic preferences, and trade
Subtitle: a gravity approach
By: Muhammed Dalgin, Devashish Mitra, Vitor Trindade.
Contributors: Mitra, Devashish.; Trindade, Vitor; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10800; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10800.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Imports -- Mathematical models.; Imports -- Developing countries -- Mathematical models.; International trade -- Mathematical models.
Description: "In this paper, we show that inequality is an important determinant of import demand, in that it augments the standard gravity model in a significant way.  We interpret this result with the aid of a model in which tastes are nonhomothetic.  Classification of products, based on the correlation between household budget shares in the US and income, into "luxuries" and "necessities," works very well in our analysis when we restrict the analysis to developed importing countries.  While the imports of luxuries increase with the importing country's inequality, imports of necessities decrease with it.  Furthermore, we find that an increase in the level of inequality in the importing country generally leads to an increase in imports from developed countries, and to a reduction in imports from low-income countries"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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