International trade, income distribution and welfare
Journal of International Economics | Elsevier | Published : 2018
This paper studies the relationship between income distribution and international integration in a canonical trade setting with one change. In the standard model prices are solely a function of (constant) marginal costs and (constant) elasticities, implying that information on individual incomes are of no value to a firm. To allow a more realistic role for consumer level information, a firm's strategy space is expanded to include non-linear prices. Now profit maximizing firms use information on income distribution to design a product for each income class and set prices to induce each group to optimally select the appropriate option. Equilibrium involves designs below the first best for low ..View full abstract
Awarded by Australian Research Council
I would like to thank Andres Rodriguez-Clare, along with two anonymous referees for their valuable comments and suggestions. The paper also benefited from numerous seminars and presentations. Financial support from Peter B. Kenen Fellowship at Princeton University and the Australian Research Council, grant DP-140101128, is gratefully acknowledged.