We would like to thank two anonymous referees for helpful comments and suggestions, and Alexander Erler for excellent research assistance. We also thank Oleg Itskhoki for helpful comments on an earlier version of the paper. Kreickemeier gratefully acknowledges financial support from the Leverhulme Trust under Programme Grant F/00114/AM.
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Redistributing Gains from Globalisation†
Article first published online: 9 DEC 2009
DOI: 10.1111/j.1467-9442.2009.01588.x
© The editors of the Scandinavian Journal of Economics 2009
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How to Cite
Egger, H. and Kreickemeier, U. (2009), Redistributing Gains from Globalisation. The Scandinavian Journal of Economics, 111: 765–788. doi: 10.1111/j.1467-9442.2009.01588.x
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Publication History
- Issue published online: 9 DEC 2009
- Article first published online: 9 DEC 2009
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Keywords:
- Heterogeneous firms;
- fair wages;
- wage inequality;
- unemployment;
- trade liberalisation
- D31;
- F12;
- F15;
- F16;
- H25
Abstract
This paper analyses the effects of redistribution in a model of international trade with heterogeneous firms in which a fair-wage effort mechanism leads to firm-specific wage payments and involuntary unemployment. The redistribution scheme is financed by profit taxes and gives the same absolute lump-sum transfer to all workers. International trade increases aggregate income and income inequality, ceteris paribus. If, however, trade is accompanied by a suitably chosen increase in the profit tax rate, it is possible to achieve higher aggregate income and a more equal income distribution than in autarky, provided that the share of exporters is sufficiently high.