The Consequences of Tariff Reduction for Economic Activity and Inequality


The recent increase in trade liberalization has had substantial distributional consequences, although the direction of the relationship and the mechanism driving it has been open to debate. This paper analyzes the impact of tariff reductions on the dynamics of wealth and income inequality in a growing economy in which agents accumulate both physical capital and international bonds. Our study, which comprises a combination of formal analysis, supplemented with numerical simulations, suggests that in the long run the tariff reduction will be expansionary and be associated with both a permanent reduction in wealth inequality but an increase in income inequality, the magnitudes of which depend upon the speed with which the tariff reduction is implemented. For plausible parameterization of the model our numerical simulations seem to be generally consistent with empirical evidence.

Información adicional

  • Presentador: Jorge Rojas-Vallejos
  • Proveniente: Universidad de Washington
  • Fecha: Martes, 31 Marzo 2015
  • Hora: 12:50
  • Lugar: Sala de reuniones, Departamento de Economía