Next Article in Journal
Catastrophic Economic Consequences of Healthcare Payments: Effects on Poverty Estimates in Egypt, Jordan, and Palestine
Previous Article in Journal
Effects of Primary, Secondary and Tertiary Education on Conflict Intensity in Africa
Previous Article in Special Issue
How Offshoring Can Affect the Industries’ Skill Composition
Article Menu

Export Article

Open AccessArticle
Economies 2015, 3(4), 186-215; doi:10.3390/economies3040186

The Redistribution of Trade Gains When Income Inequality Matters

Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University, Behringstr. 21, D-54296 Trier, Germany
Academic Editor: Ralf Fendel
Received: 29 June 2015 / Revised: 5 October 2015 / Accepted: 16 October 2015 / Published: 28 October 2015
(This article belongs to the Special Issue Globalization and Inequality)
View Full-Text   |   Download PDF [479 KB, uploaded 28 October 2015]   |  

Abstract

How does a redistribution of trade gains affect welfare when income inequality matters? To answer this question, we extend the [1] model to unionized labor markets and heterogeneous workers. As redistribution schemes, we consider unemployment benefits that are financed either by a wage tax, a payroll tax or a profit tax. Assuming that welfare declines in income inequality, we find that welfare increases up to a maximum in the case of wage tax funding, while welfare declines weakly (sharply) if a profit tax (payroll tax) is implemented. These effects are caused by the wage tax neutrality (due to union wage setting) and by a profit tax-induced decline in long-term unemployment. As a result, the government’s optimal redistribution scheme is to finance unemployment benefits by a wage tax. View Full-Text
Keywords: trade liberalization; redistribution; income inequality; heterogeneity; trade unions trade liberalization; redistribution; income inequality; heterogeneity; trade unions
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

Scifeed alert for new publications

Never miss any articles matching your research from any publisher
  • Get alerts for new papers matching your research
  • Find out the new papers from selected authors
  • Updated daily for 49'000+ journals and 6000+ publishers
  • Define your Scifeed now

SciFeed Share & Cite This Article

MDPI and ACS Style

de Pinto, M. The Redistribution of Trade Gains When Income Inequality Matters. Economies 2015, 3, 186-215.

Show more citation formats Show less citations formats

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Economies EISSN 2227-7099 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top