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Title:Inequality and the import demand function PDF Logo
Authors:Adam, Antonis
Katsimi, Margarita
Moutos, Thomas
Issue Date:2008
Series/Report no.:CESifo working paper 2196
Abstract:In this paper we build a model of trade in vertically differentiated products and find that income inequality can affect the demand for imports even in the presence of homothetic preferences. The empirical importance of changes in inequality on the demand for imports is then assessed by examining panel data for 36 developing and developed countries for the 1980-1997 period. We find significant evidence supporting our prediction that inequality has a large influence on the demand for imports. Moreover we find that, in line with the predictions of our theoretical model, this influence is positive for high-income countries (countries that produce the high quality variety of the vertically differentiated product) and negative for low-income countries (countries that produce the low quality variety of the vertically differentiated product).
Subjects:inequality
import demand
vertically differentiated products
panel data
JEL:F13
H23
O24
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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