Measuring the Unequal Gains From Trade

  • Citation: Fajgelbaum, Pablo D., and Amit K. Khandelwal. “Measuring the Unequal Gains from Trade.” The Quarterly Journal of Economics 131, no. 3 (2016): 1113–80.
    • Topics:
    • Business and Trade
    • Keywords:
    • international trade
    • consumers
    • aggregate expenditure
    • gravity equation

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. The approach requires data on aggregate expenditures and parameters estimated from a nonhomothetic gravity equation. We find that trade typically favors the poor, who concentrate spending in more traded sectors.

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