Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316573 
Year of Publication: 
2020
Citation: 
[Journal:] East Asian Economic Review (EAER) [ISSN:] 2508-1667 [Volume:] 24 [Issue:] 3 [Year:] 2020 [Pages:] 207-235
Publisher: 
Korea Institute for International Economic Policy (KIEP), Sejong-si
Abstract: 
Acknowledging that individuals dislike having low relative income renders trade less attractive when seen as a technology that integrates two economies by merging separate social spheres into one. We define a trembling trade as a situation in which gains from trade are less than losses in relative income, with the result that global social welfare is reduced. We show that a trembling trade can arise even when trade is more gainful in four ways: through trade the absolute income of everyone increases, the income gap in both economies is reduced, as is the income gap between the trading economies. However, trade brings populations, economies, or markets that were not previously connected closer together in social space. As a consequence, separate social spheres merge, and people's social space and their comparators are altered. Assuming that people like high (absolute) income and dislike low relative income, the aggregate increase in unhappiness caused by the trade-induced escalation in relative deprivation can result in a negative overall impact of trade on (utilitarian-measured) social welfare, if the absolute income gains are not large enough to mitigate the relative income losses.
Subjects: 
Gains from trade
Increase of incomes
Decrease of income gaps
Integration
Change of social space
Low relative income
Quadruply gainful trade
Trembling trade
Social welfare
JEL: 
D31
D63
F10
F15
R12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.