Measuring the Unequal Gains from Trade
Coauthor(s): Pablo Fajgelbaum.
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Individuals that consume different baskets of goods are differentially affected by relative price changes caused by international trade. We develop a methodology to measure the unequal gains from trade across consumers within countries that is applicable across countries and time. The approach uses data on aggregate expenditures across goods with different income elasticities and parameters estimated from a non-homothetic gravity equation. We find considerable variation in the pro-poor bias of trade depending on the income elasticity of each country's exports. Nonhomotheticities across sectors imply that the gains from trade typically favor the poor, who concentrate spending in more traded sectors.
Fajgelbaum, Pablo, and Amit Khandelwal. "Measuring the Unequal Gains from Trade." Columbia Business School, July 2014.