Bilateral Trade Flows and Income Distribution Similarity.
Where this comes from
- Record sourced from PubMed, PMID 27137462.
- Also identified by DOI 10.1371/journal.pone.0128191 and PMC identifier 4854469.
- Licence recorded as CC BY.
- The licence permits redistribution, so the abstract is shown in full and the full text is available from the publisher.
Abstract
Current models of bilateral trade neglect the effects of income distribution. This paper addresses the issue by accounting for non-homothetic consumer preferences and hence investigating the role of income distribution in the context of the gravity model of trade. A theoretically justified gravity model is estimated for disaggregated trade data (Dollar volume is used as dependent variable) using a sample of 104 exporters and 108 importers for 1980-2003 to achieve two main goals. We define and calculate new measures of income distribution similarity and empirically confirm that greater similarity of income distribution between countries implies more trade. Using distribution-based measures as a proxy for demand similarities in gravity models, we find consistent and robust support for the hypothesis that countries with more similar income-distributions trade more with each other. The hypothesis is also confirmed at disaggregated level for differentiated product categories.
Medical subject headings
- Commerce
- Consumer Behavior
- Income
- Models, Theoretical