Abstract
How are the gains and losses from trade distributed across households? We document that tradable goods and services constitute a larger fraction of expenditures for low-wealth and low-income households. Using a trade model with nonhomothetic preferences and uninsurable earnings risk, we measure the differential welfare gains from trade along the income and wealth distribution. A permanent reduction in trade costs that generates the rise in import share of GDP seen in the data from 2001 to 2014 leads to 57% larger welfare gains for households in the lowest wealth decile relative to those in the highest wealth decile.
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