Scandinavian Working Papers in Economics
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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 73:
Income Inequality as a Determinant of Trade Flows*

Helena Bohman () and Désirée Nilsson ()

Abstract: Consumer studies have a long tradition of incorporating non-homothetic preferences in their models, whereas this has been very uncommon in studies of international trade. We use a model from Mitra and Trindade (2005) to set up a gravity model in which we include income distribution measures as explanatory variables for the exporting as well as for the importing countries. Our results indicate that non-homothetic preferences significantly affect both exports and imports.

Keywords: income inequality; trade flows; (follow links to similar papers)

JEL-Codes: D31; F10; (follow links to similar papers)

28 pages, September 22, 2006

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