Does Trade Cause Inequality?

This paper examines the effect of international trade on intra-national distribution of income. The empirical validity of any such linkage (between trade-GDP ratio and Gini coefficient of income inequality) is tested in an instrumental variable estimation of cross-country regressions. There are three main findings from a sample of 73 countries in 1985. First, greater participation in trade significantly reduces income inequality. Second, the strong negative association between trade and inequality does not arise because countries that have a more egalitarian distribution of income for reasons other than trade engage in more trade. Third, growth provides a channel through which trade lowers inequality by raising both initial income and subsequent growth.

Moving People or Jobs? A New Perspective on Immigration and International Outsourcing

We present a model that allows us to compare the effects that frictions involved in immigration and international outsourcing have on the skilled-unskilled wage inequality. We show that, for any given level of contractual friction in the production of intermediate goods, the wedge between the wages of the skilled and unskilled workers widens as the frictions in immigration wear out. The skilled-unskilled wage gap, for any given level of friction in immigration, is sensitive to variations in contractual frictions in intermediates that affect international outsourcing.Wage Inequality, Immigration, Outsourcing, Contract Theory.

Embracing Co-Creation Experience in Economics: Rethinking Surplus

Economics without the lens of co-creation, in the new evolving economy, blurs visibility. We provide a framework that can reshape economic thinking with co-creation at the core. In particular, an individual’s experience from co-creation is at the foundation of our economic apparatus. This is consistent with the mounting evidence on the new evolving economy where the conventional firm-centric view is of little relevance. We compare and contrast key elements of our co-creation thinking with conventional economic thinking. We show how fundamental economic concepts, such as surplus and efficiency, must be modified in order to incorporate co-creation experiences. We also posit a principle of co-creative advantage to guide efficient co-creation.http://deepblue.lib.umich.edu/bitstream/2027.42/98831/1/1188_Chakrabarti.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/98831/4/2013Oct2AChakrabartiWP1188.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/98831/6/1188_Ramaswamy_Dec13.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/98831/8/1188_VRamaswamy_Apr14.pdfDescription of 1188_Ramaswamy_Dec13.pdf : Dec 2013 revisionDescription of 2013Oct2AChakrabartiWP1188.pdf : Sept 2013 updateDescription of 1188_VRamaswamy_Apr14.pdf : April 2014 revisio

Cross-border Merger, Vertical Structure, and Spatial Competition

This analysis is a natural follow up of continued efforts to assess the consequences of cross-border mergers in industries with a vertical structure. Absent free trade, in a vertically related industry, the downstream firms will not choose the social optimum under spatial price discrimination when none of the downstream firms produce all the varieties that consumers demand. We show that free trade will induce the downstream firms to gravitate toward the social optimum but an upstream merger across borders, under free trade, will pull the downstream firms away from the social optimum back to their autarkic positions.Product-differentiation, Price-discrimination, Spatialcompetition, Firm-location, Cross-border Merger

A Ricardian Theory of Production, Trade and Finance - The Role of Credit Market Imperfection

We build up a Ricardian trade model for a small open economy with imperfection in the market for credit which eventually affects the pattern of production and trade. Workers/entrepreneurs are endowed with different levels “capital” and need to borrow to produce the credit intensive good. Firms with strong internal cash flow will enter the credit intensive sector. Among those the weaker ones will like to deal in fragments and the richer ones will vertically integrate. Thus distribution of capital ownership determines the nature of production and trade. Those producing fragments may engage in external as well as internal trade. Two credit constrained nations may trade in fragments. The unconstrained richer firms will follow the standard Ricardian incentive to trade. Even if trade does not require credit, shortage of production credit will affect production and trade. Later we generalize our framework to determine prices and interest rate simultaneously. Even there is no role for trade credit, financial stringency will reduce volume of production and trade

Sequential Spatial Competition in Vertically Related industries with Different Product Varieties

We demonstrate the sensitivity of the location of downstream firms, engaged in sequential spatial competition, to the vertical structure of an industry where no downstream firm can produce all varieties demanded

Sequential Spatial Competition in Vertically Related industries with Different Product Varieties

We demonstrate the sensitivity of the location of downstream firms, engaged in sequential spatial competition, to the vertical structure of an industry where no downstream firm can produce all varieties demanded

Cross-border Merger, Vertical Structure, and Spatial Competition

This analysis is a natural follow up of continued efforts to assess the consequences of cross-border mergers in industries with a vertical structure. Absent free trade, in a vertically related industry, the downstream firms will not choose the social optimum under spatial price discrimination when none of the downstream firms produce all the varieties that consumers demand. We show that free trade will induce the downstream firms to gravitate toward the social optimum but an upstream merger across borders, under free trade, will pull the downstream firms away from the social optimum back to their autarkic positions

Cross-border Merger, Vertical Structure, and Spatial Competition

This analysis is a natural follow up of continued efforts to assess the consequences of cross-border mergers in industries with a vertical structure. Absent free trade, in a vertically related industry, the downstream firms will not choose the social optimum under spatial price discrimination when none of the downstream firms produce all the varieties that consumers demand. We show that free trade will induce the downstream firms to gravitate toward the social optimum but an upstream merger across borders, under free trade, will pull the downstream firms away from the social optimum back to their autarkic positions