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Income Distribution, Welfare, and the Patterns of Trade
2025-05-16
Time: 10:00 am - 11:30 am, May 16th, 2025
Speaker: Reto Foellmi (University of St. Gallen)
Venue: 1F, Wanzhong Building, Langrun Garden, Peking University
Abstract:
We develop a two-country model of international trade featuring non-homothetic prefer-ences and income inequality, generating a price schedule where cheap necessities coexist with expensive luxury goods. A central mechanism driving price differences is firm's ability to shift fixed costs between countries, shaping trade patterns and welfare. In a North-South setting, poor consumers in the rich country are most negatively affected by this fixed cost shifting, leading to a Manhattan effect. Following mean-preserving redistribution, import volumes rise in the unequal country, and fall in the more equal one.
Speaker:
Reto Foellmi is a Professor of International Economics at the University of St. Gallen and serves as Director of SIAW-HSG. He is currently the Vice President for Institutes and Executive Education at the University. His research interests include macroeconomics, income distribution, international trade, and economic growth. He has published extensively in these areas, including two books and numerous articles in leading academic journals, such as Review of Economic Studies, Journal of International Economics, Review of Economics and Statistics, American Economic Journal: Macroeconomics and Economic Journal. Previously, he held the positions of Head of the Economics Department and Dean of the School of Economics and Political Science. He is also a Research Fellow at the Centre for Economic Policy Research (CEPR) in London. He received his PhD in Economics from the University of Zurich in 2003.