Research

Peer Reviewed Publications

"Income Inequality, International Trade and Firm Location" (with Richard Chisik), 2022, Economics Letters, volume 214, 110442.

Abstract:

In this paper we analyze the effect of within-country income inequality on economic outcomes. We develop a new model of international trade with non-homothetic preferences whereby within-country income distribution affects firm location decisions. In a two-country, three-sector framework with increasing returns to scale and positive trade costs we show that increases in income inequality generates firm movement to countries with more equal income distributions.

"Does inequality drive the Dutch disease? Theory and evidence" (with Richard Chisik, Harun Onder and Bill Battaile), 2017, Journal of International Economics, Elsevier, vol. 106(C), pages 104-118.

Abstract:

In this paper we show that the Dutch disease can arise solely from inequality in the distribution of natural resource rents. Given two otherwise identical countries that differ only in the ownership shares of the natural resource rents, the country with the less equal distribution will have less production of manufacturing goods and less development of learning-by-doing in this sector. As opposed to conventional models, where income distribution has no effect on economic outcomes, an unequal distribution of the resource wealth can generate the Dutch disease dynamics even in countries with an initial comparative advantage in manufacturing. We also provide a range of empirical tests of our model, including both difference and system GMM estimators in a dynamic panel. To disentangle the effects of inequality and institutional quality we purge our inequality measure of any linear or higher order correlations with institutional quality and repeat our system and difference GMM estimations. Our empirical analysis supports the hypothesis that inequality indeed plays a significant role in whether being resource-rich is a blessing or a curse for a country. The more unequal is the distribution of natural resource rents, the stronger is the disease.

Working Papers

"The Paradox of Transfers: Distribution and the Dutch Disease" (with Richard Chisik), 2020, Working papers 071, Ryerson University, Department of Economics.

Abstract:

In this paper we analyze the effect of within-country income inequality on economic outcomes. In particular, we develop a new model of international trade with non-homothetic preferences whereby within-country income distribution affects the pattern of trade and economic growth. Alternative forms of foreign transfers, such as foreign aid and remittances, interact with the income distribution in dissimilar manners, which in turn generates differences in spending patterns, the real exchange rate, production patterns, and the pattern of international trade. In a three sector model with international trade and production we show that while remittances can foster economic growth, foreign aid can cause economic stagnation. An appreciation of the real exchange rate inducing a production shift to the sector with less long-run growth potential is known as the Dutch disease and in our model the disease is triggered by within-country income differences and the form of the foreign transfer. We empirically verify these hypotheses with data from a panel covering the years 1991-2009 while controlling for the issues of omitted variable bias and the possible endogeneity of foreign aid and remittances.

Work in Progress

For a full list of my working papers and articles please click here.