We develop a novel method to infer inequality within a country. Our two-step method exploits the link between a country's income distribution and its import patterns. First, we identify varieties of goods typically imported by richer, more unequal countries. In a second step, we exploit the variation of inequality elasticities across varieties of goods to uncover within-country net income inequality. For a given average income, disproportionate imports of highly income elastic varieties correlate with income dispersion. We take advantage of the global availability of trade flow reports to extend inequality data coverage across countries and over time. Notably, we add consistently measured inequality data for developing countries, where conventional inequality data is scarce. Our final data set covers inequality in 160 countries between 1995-2018. We document the viability of our methodology with multiple cross-validation exercises. The resulting inequality data facilitates the study of cross-country causes and consequences of inequality.

In a recent paper, Fajgelbaum and Khandelwal (2016) develop a methodology to quantify the distributional consequences of trade. Their approach relies on aggregate expenditure data and on a non-homothetic gravity equation based on an Almost Ideal Demand System (AIDS). In this setup, we show that the structural parameters governing the welfare gains are highly sensitive to the determinants of spending on domestic goods. We extend their model by allowing for a home bias in tastes or for more complex trade costs. While Fajgelbaum and Khandelwal (2016) find that trade typically decreases the relative price of the goods consumed by poor households, we show that the pro-poor bias of trade becomes weaker or can even turn slightly pro-rich for most countries depending on the specification. Using observations for domestic trade in an AIDS (or translog) gravity model makes the results very sensitive to the exact modeling choice.

This paper investigates the heterogeneous effect of destination per capita income on exports across origin countries in different locations. Using bilateral HS 6-digit trade data, I show that, on average, proximity to rich countries is a catalyst for exports as destination per capita income rises. Yet, the effect is declining over the course of development, turning negative for advanced economies. The results indicate that proximity to rich markets incites expansion in the number and quantity of exported products but attenuates unit values. I contrast proximity to high-income per capita countries with the effect of domestic per capita income of the exporter and find that the two country characteristics work largely in opposite directions. A higher domestic per capita income promotes exports to rich destinations particularly for advanced economies. On average, richer countries export goods of higher unit values as destination income per capita rises at the expense of a lower number and quantity of products exported.