We derive conditions under which wealth inequality can be a source of comparative advantage when financial markets are imperfect. We also use panel data to test our predictions.
We develop a simple theoretical model to examine the impact of the distribution of wealth on the patterns of trade when capital markets are imperfect. Our model predicts that the dispersion of wealth can be a determinant of comparative advantage for low-income countries with poor financial institutions. We find support for these prediction using export and financial panel data from a large sample of countries.
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Emmanuel Amissah, Spiros Bougheas and Rod Falvey
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Sir Clive Granger BuildingUniversity of NottinghamUniversity Park Nottingham, NG7 2RD
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