Trade Policy and Redistribution When Preferences are Non-Homothetic

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World Bank, Washington, DC

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This paper compares redistribution through trade restrictions versus domestic lump-sum transfers. When preferences are non-homothetic, even domestic lump-sum transfers affect relative prices. Thus, contrary to the conventional wisdom, domestic lump-sum transfers are not necessarily superior to distortionary trade policy. The paper develops this argument in the context of the food export bans imposed by many developing countries in the late 2000s.

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TRADE RESTRICTIONS, TRADE POLICY, REDISTRIBUTION, FOOD EXPORT BAN

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http://hdl.handle.net/123456789/410627

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http://documents.worldbank.org/curated/en/122941489496628184/Trade-policy-and-redistribution-when-preferences-are-non-homothetic

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