International trade affects consumption prices, with potentially different impacts on poor and rich consumers. We study these unequal impacts building on the Almost Ideal Demand System (AIDS) gravity model of Fajgelbaum and Khandelwal (2016). We augment the original model with a home bias in tastes and allow for trade costs to differ for domestic and foreign trade. In this setup, we show that the structural parameters governing the welfare gains are highly sensitive to the determinants of spending on domestic goods. This extension largely weakens the pro-poor bias of trade which leads us to conclude that the AIDS gravity framework does not generate robust results about the distributive effects of trade within countries.

This paper develops a novel method to estimate inequality within a country based on what it imports. If preferences are non-homothetic, rich and poor individuals in a country have different consumption profiles. Observing imports can thus inform us about the income distribution in a country. The global availability of trade data allows us to estimate inequality using the same transparent and comparable method for a large sample of countries over time. Compared to conventional data, we feature an especially good coverage of developing countries. We provide a number of robustness checks and cross-validation exercises to gauge the performance of our method.

This paper proposes a novel empirical strategy to study how third-country demand effects determine domestic production. I show that multilateral market access is a key determinant of a country's output composition in a multi-country trade model with non-homothetic CES preferences and economies of scale. The model predicts that firms' production choice is determined by a trade-off between demand incentives and production costs, and is reflected in the destination composition of a country's exports. Using product-level trade data, I confirm that market access increases exports disproportionately to high-income countries - suggesting a higher share of high-quality producers - yet only for exporters in the top quintile of the market access distribution.