Scandinavian Working Papers in Economics

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

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

Helena Bohman () and Désirée Nilsson ()
Additional contact information
Helena Bohman: Jönköping International Business School, Postal: Jönköping University, P.O. Box 1026, SE-551 11 Jönköping,
Désirée Nilsson: Jönköping International Business School, Postal: Jönköping University, P.O. Box 1026, SE-551 11 Jönköping,

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

JEL-codes: D31; F10

28 pages, September 22, 2006

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