On the Distributional Effects of International Tariffs

On the Distributional Effects of

International Tariffs

Daniel Carroll (FRB Cleveland)

Sewon Hur (FRB Cleveland)

Sogang University

June 7, 2019

The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of

Cleveland or the Federal Reserve System.

Introduction

I What are the distributional consequences of trade?

I Effect on labor markets: Autor, Dorn, Hanson, and Song

(2014)

I Low-skilled harmed more from opening to trade

I Effect on prices: Fajgelbaum and Khandelwal (2016); Carroll

and Hur (2019a)

I Poor most sensitive to tradable consumption prices

1 / 42

What we do

I Tradable goods/ services constitute a larger fraction of

expenditures for poor households (Carroll and Hur 2019a)

I Build a Ricardian trade model with

I non-homothetic preferences

I uninsurable income risk

I segmented labor markets

I distortionary labor and capital income taxes

I Study the distributional effects of tariffs

I without redistributionI with redistribution

I reduce labor income tax

I reduce capital income tax

I lump-sum transfer

2 / 42

What we find

I What are the distributional consequences of bilateral tariff

increases?

I Answer: It depends on how tariff revenue is distributed

I Without redistribution . . .I large welfare losses for everyone, but especially hurts the

poor and the skilled

I With redistribution . . .I labor income tax reduction generates a more equitable

distribution of welfare losses

I capital income tax reduction strongly favors the rich (really

hurts the poor)

I lump-sum rebating tariff revenue can produce a welfare gain

on average, but at the expense of the skilled3 / 42

Empirical analysis

Data

I We use two complementary datasets

I Consumer Expenditure Survey (CEX, 2004–14)

+ detailed expenditure categories

+ self-reported owner-equivalent rent

– can’t compute net worth: only liquid wealth

I Panel Survey of Income Dynamics (PSID, 2004–14)

– more aggregated expenditure categories

– have to impute owner-equivalent rent

+ detailed measures of wealth

4 / 42

Tradable expenditure shares (CEX)

I Total expenditures: 500+ expenditure categories

I exclude mortgage interest, property taxes, home insurance

I include self-reported owner’s equivalent rent

I Tradable expenditures: 307 items

I if imports or exports exceed 11 percent of production Examples

I 23,484 working-age household-year observations

5 / 42

Tradable expenditure shares (PSID)

Exp. category Tradable Nontradable

Child care & education X

Clothing X

Food food at home away from home

Health care prescriptions all other

Housing w/o repairs furnishings utilities, rent∗

Transportation gasoline, purchase and all other

w/o repairs lease of cars and trucks

Vacation/ent. 22 percent all other

Repairs 21 percent all other

I ∗ : excludes mortgage, property taxes, and home insurance, but includes

owner’s equivalent rent, imputed by dividing state-level price-to-rent

ratios from value of primary residence

I 30,244 working-age household-year observations

6 / 42

Tradable shares and disposable labor income

I Tradable shares decline with disposable labor income

I Level is higher in CEX

0.35

0.40

0.45

trada

ble

expe

nditu

re s

hare

(CEX

)

1 2 3 4 5 6 7 8 9 10disposable labor income decile

0.25

0.30

0.35

trada

ble

expe

nditu

re s

hare

(PSI

D)

1 2 3 4 5 6 7 8 9 10disposable labor income decile

7 / 42

Tradable shares and wealth

I Tradable shares decline with wealth

0.35

0.40

0.45

trada

ble

expe

nditu

re s

hare

(CEX

)

1 2 3 4 5 6 7 8 9 10liquid wealth decile

0.25

0.30

0.35

trada

ble

expe

nditu

re s

hare

(PSI

D)

1 2 3 4 5 6 7 8 9 10wealth decile

8 / 42

Related empirical work

I Boppart (2014) uses CEX to show that goods expenditure

shares decline with income

I Borusyak and Jaravel (2018) also use CEX to show that

import expenditure shares are similar across income and

education groups

I We focus on tradable expenditure shares since trade can

impact prices of all tradable goods and services through

I increased competition

I input-output linkages

I Many other papers use barcode data, which cover a small

fraction of overall household expenditures

9 / 42

Summary of empirical findings

I Tradable expenditure shares decline with income and wealth

I Robust to controlling for household characteristics: Regressions

I household head age and education

I household size

I home ownership

I Robust to: Sensitivity

I excluding all housing expenditures

I no partial PSID adjustments (vacation/ent./repairs)

I using total labor income

I alternative tradability measures (to include indirect imports)

I Motivates our model of

I uninsurable income risk → wealth and income heterogeneity

I non-homothetic preferences → different consumption baskets

10 / 42

Summary of empirical findings

I Tradable expenditure shares decline with income and wealth

I Robust to controlling for household characteristics: Regressions

I household head age and education

I household size

I home ownership

I Robust to: Sensitivity

I excluding all housing expenditures

I no partial PSID adjustments (vacation/ent./repairs)

I using total labor income

I alternative tradability measures (to include indirect imports)

I Motivates our model of

I uninsurable income risk → wealth and income heterogeneity

I non-homothetic preferences → different consumption baskets10 / 42

Main ingredients of model

I Ricardian model of trade (Dornbusch-Fisher-Samuelson 1977)

I Uninsurable labor income risk

(Aiyagari-Bewley-Hugget-Imrohoroglu)

I Capital-skill complementarity (Stokey,

Krusell-Ohanian-Rios-Rull-Violante, Parro)

I Non-homothetic preferences (Stone-Geary)

I Linear labor and capital income taxes

11 / 42

Model

I Two symmetric countries indexed by i = 1, 2

I Households

I consume, work, and save

I 2 types: unskilled and skilled

I face uninsurable labor income risk

I Production and Trade

I tradables and non-tradables used for consumption and for

investment

I ω ∈ [0, 1] continuum of tradable intermediate goods

I shipment of good ω from o to i faces trade costs τoiI τoi consists of a technological cost τoi ,T and a tariff τi ,P

I Government taxes to finance wasteful spending

12 / 42

Outline of model

I We begin with the production of tradable goods

Households

NontradablesproducerDomestic

intermediate tradablesproducer

Foreign Intermediate

tradablesproducer

Tradablesproducer

Capital producer

12 / 42

Final tradables producer

I A representative final tradables producer bundles the varieties

of tradables {qoi (ω)}ω,o into a final good, YiT , and solves

max{qoi (ω)}ω

PiTYiT −∫ 1

0

∑o=1,2

[τoipo (ω) qoi (ω)] dω

s.t. YiT =

{∫ 1

0

[∑o=1,2

qoi (ω)

]ρdω

} 1ρ

.

I Solution: qoi (ω) ≤(τoipo (ω)

PiT

)−θYiT , = if qoi (ω) > 0.

I Price: PiT =[∫ 1

0mino {τoipo (ω)}1−θ dω

] 11−θ

where θ = 11−ρ

is the elasticity of substitution across varieties.

13 / 42

Final tradables producer

I A representative final tradables producer bundles the varieties

of tradables {qoi (ω)}ω,o into a final good, YiT , and solves

max{qoi (ω)}ω

PiTYiT −∫ 1

0

∑o=1,2

[τoipo (ω) qoi (ω)] dω

s.t. YiT =

{∫ 1

0

[∑o=1,2

qoi (ω)

]ρdω

} 1ρ

.

I Solution: qoi (ω) ≤(τoipo (ω)

PiT

)−θYiT , = if qoi (ω) > 0.

I Price: PiT =[∫ 1

0mino {τoipo (ω)}1−θ dω

] 11−θ

where θ = 11−ρ

is the elasticity of substitution across varieties.13 / 42

Intermediate tradables producer

I Each intermediate firm produces a single tradable variety, ω

I Taking as given the price pi(ω), it solves

maxhi (ω),li (ω),ki (ω)

pi (ω) yi (ω)− wiHhi (ω)− wiLli (ω)− riki (ω)

s.t. yi (ω) = zi (ω)F (hi (ω) , li (ω) , ki (ω))

I Zero-profit price:

pi (ω) =1

zi (ω)

14 / 42

Productivity distributions in tradables production

I Productivities for variety ω are distributed according to

z1 (ω) = eηω

z2 (ω) = eη(1−ω)

I Country i = 1 is more productive at producing high ω

15 / 42

Pattern of production (free trade)

0 0.5 1

Varieties

0

0.5

1

1.5E

ffect

ive

pric

e

1/z1( )1/z

2( )

16 / 42

Pattern of production (free trade)

0 1

Varieties

0

0.5

1

1.5E

ffect

ive

pric

e

1/z1( )1/z

2( )

16 / 42

Pattern of production (costly trade)

0 0.5 1

Varieties

0

0.5

1

1.5E

ffect

ive

pric

e

1/z1( )1/z

2( )

/z1( ) /z

2( )

17 / 42

Pattern of production (costly trade)

0 1- 1

Varieties

0

0.5

1

1.5E

ffect

ive

pric

e

1/z1( )1/z

2( )

/z1( ) /z

2( )

17 / 42

Outline of model

I Let’s discuss the production of nontradable goods and capital

Households




tradablesproducer

Tradablesproducer

Capital producer

17 / 42

Non-tradables producer

I A representative firm produces non-tradable output YiN

I It solves the static profit maximization problem

maxHiN ,LiN ,KiN

PiNYiN − wiHiHiN − wiLLiN − riKiN

s.t. YiN = ziNF (HiN , LiN ,KiN) .

I Numeraire: set PiN = 1

18 / 42

Capital producer

I A representative firm produces capital Xi , by solving

maxIiT ,IiN

PiXXi − PiT IiT − IiN

s.t. Xi = ziX IκiT I

1−κiN .

19 / 42

Government

I The government finances a constant stream of (wasteful)

expenditures, Gi , by collecting

I taxes on labor income, τil ,

I taxes on capital income, τik ,

I and tariffs τiP

20 / 42

Outline of model

I Next, we discuss the household problem

Households




tradablesproducer

Tradablesproducer

Capital producer

Labor and capital

20 / 42

Households

I Household with skill type, j , solves

Vij (k , ε) = maxcT ,cN ,`,k ′

u (cT , cN , `) + βEε′|εVij (k ′, ε′)

s.t. PiTcT + cN + PiX (k ′ − k) ≤ w̃ij`ε + r̃ik + Ti ,

k ′ ≥ 0

where u (cT , cN , `) =

(cγT (cN + c̄)1−γ

)1−σ

1− σ− ψ `1+ν

1 + ν

I w̃ijt and r̃ijt are after-tax returns:

w̃ij = (1− τil)wij

r̃i = (1− τik)(ri − δPiX ).21 / 42

Equilibrium

A symmetric steady-state recursive equilibrium, given fiscal

policies {τl , τk , τP ,G ,T}, is, for j = H , L

I Functions {Vj , gjT , gjN , gj`, gjk},I Nontradable producer plans {YN ,HN , LN ,KN},I Final tradable producer plans

{YT , {qoi(ω)}ω∈[0,1],i=1,2,o=1,2

},

I Intermediate producer plans {yi(ω), hi(ω), li(ω), ki(ω)}ω,i ,I Capital producer plans {X , IT , IN},I Prices

{wH ,wL, r ,PT ,PX , {pi(ω)}ω,i

}, and

I Invariant distributions {µ∗j }j such that:

22 / 42

1. Given prices, households optimize.

2. Given prices, firms optimize.

3. Goods markets clear.

4. Factor markets clear.

5. Balanced trade.

6. Gov’t budget holds: G + T = τl∑

j wj

∫εgj` (k , ε) dµj (k , ε)

+τk(r − δPX )∑

j

∫kdµj (k , ε) + τP

∫qoi(ω)dω, for o 6= i .

7. For any (K, E) ∈ B, the invariant distribution µ∗j satisfies

µ∗j (K, E) =

∫S

∑ε′∈E

1{gjk (k,ε)∈K}Γ (ε′, ε) dµ∗j (k , ε) .

23 / 42

Characterization of equilibrium

I The tradable price is given by PT =1

z̃(τ),

where z̃(τ) is a measure of aggregate productivity:

z̃(τ) =

[∫ 1−ω̄(τ)

0

(z2 (ω)

τ

)θ−1

dω +∫ 1

1−ω̄(τ)z1 (ω)θ−1 dω

] 1θ−1

I Trade costs distort ...

(1

η

)η

24 / 42



z̃(τ),


z̃(τ) =

[∫ 1−ω̄(τ)

0

(z2 (ω)

τ

)θ−1

dω +∫ 1

1−ω̄(τ)z1 (ω)θ−1 dω

] 1θ−1

I Trade costs distort the extensive ...

(1

η

)η

24 / 42



z̃(τ),


z̃(τ) =

[∫ 1−ω̄(τ)

0

(z2 (ω)

τ

)θ−1

dω +∫ 1

1−ω̄(τ)z1 (ω)θ−1 dω

] 1θ−1

I Trade costs distort the extensive and intensive margins

(1

η

)η

24 / 42



z̃(τ),


z̃(τ) =

[∫ 1−ω̄(τ)

0

(z2 (ω)

τ

)θ−1

dω +∫ 1

1−ω̄(τ)z1 (ω)θ−1 dω

] 1θ−1

I The capital price is given by PX =1

zX

(PT

κ

)κ(1

1− κ

)1−κ

I Comparative statics:

d log (PT )

dτ= −d log (z̃(τ))

dτ> 0

d log (PX )

dτ= −κd log (z̃(τ))

dτ> 0

24 / 42

Quantitative Analysis

Quantitative Analysis

I Calibrate model to match features of U.S. economy

I Experiment

I impose a tariff of 20 percent

I compute transition to new steady state

I Various fiscal policies

I increase government expenditure

I reduce labor income tax

I reduce capital income tax

I lump-sum redistribute

25 / 42

Calibration

I Preferences:

Parameters Values Targets / Source

Discount factor β 0.96 Wealth-to-GDP: 4.8 (2014)

Risk aversion σ 2 Standard value

Tradable share γ 0.27 Tradable exp. share: 36% (2004–14)

Non-homotheticity c̄ , 0.09 Tradable exp. share of top

wealth quartile: 31 percent (2004–14)

Disutility from labor ψ 440 Average hours: 30 percent

Frisch elasticity 1/ν 0.5 Standard value

26 / 42

Calibration

I Technology:

F (L,H ,K ) =[

(1− µ) Lζ + µ[(1− α)Hχ + αKχ]ζχ

] 1ζ


Skilled fraction, H̄ 0.33 Skilled labor force: 33 percent

Capital weight, α 0.83 Capital income share: 36 percent

Skilled weight, µ 0.61 Skilled labor inc. share: 36 percent

Elasticity of substitutions,

unskilled–capital, 1/(1− ζ) 1.67 Krusell et al. (2000)

skilled–capital, 1/(1− χ) 0.67 Krusell et al. (2000)

27 / 42

Calibration

I Assume τP = 0 (less than 2% of gov’t revenue in 2014)

I Other parameters:


Elas. of subs. between

tradable intermediates, θ 5.7 Trade elasticity: 4

Factor elasticity, κ 0.59 Tradable input shares in capital production

Productivity distribution, η 1.29 Employment share of top 17 percent of large

manufacturing establishments: 32 percent

Iceberg cost, (τ − 1)× 100 0.27 Import share: 17 percent

Income tax, τ` = τk 0.19 Government consumption: 15 percent of GDP

28 / 42

Productivity shocks

I ε follows a finite-state Markov process which approximates

the continuous process,

log εt = ρε log εt−1 + νt , νt ∼ N(0, σ2

ν

)

I We set ρε = 0.92 and σν = 0.21 following Floden and Linde

(2001)

29 / 42

Main results

I Without redistribution

I tariffs harm skilled more than unskilled and poor more than

rich

I With redistribution

I labor income tax reduction delivers higher average welfare

than capital income tax reduction, but also lower GDP

I small average welfare increase from lump-sum redistribution,

at the expense of the skilled

30 / 42

Effect of tariffs on prices

I Tradables price and investment price do not depend on how

tariff revenue is spent

(a) Tradables price

0 20 40 60Time

100

105

Inde

x (p

erio

d 0

= 1

00)

(b) Investment price

0 20 40 60Time

100

105In

dex

(per

iod

0 =

100

)

31 / 42

Effect of tariffs on factor prices

(a) After-tax skilled wage

0 20 40 60Time

95

100

105

Inde

x (p

erio

d 0

= 1

00)

(b) After-tax unskilled wage

0 20 40 60Time

95

100

105

Inde

x (p

erio

d 0

= 1

00)

(c) After-tax net return

0 20 40 60Time

2

2.5

3

Per

cent

Government expenditureCapital income taxLabor income taxLumpsum transfer

32 / 42

Effect of tariffs on economic activity

(a) Consumption

0 20 40 60Time

95

100

105In

dex

(per

iod

0 =

100

) Government expenditureCapital income taxLabor income taxLumpsum transfer

(b) Investment

0 20 40 60Time

95

100

Inde

x (p

erio

d 0

= 1

00)

(c) GDP

0 20 40 60Time

95

100

105

Inde

x (p

erio

d 0

= 1

00)

(d) Capital

0 20 40 60Time

95

100In

dex

(per

iod

0 =

100

)

33 / 42

Welfare Calculation

I For each household, we compute the consumption

equivalence, ∆

I How much would initial steady state consumption have to be

permanently increased for a household to be indifferent

between raising tariffs or not?

I Solve for ∆ such that Vj∆ (k , ε) = Vj ,t=1 (k , ε)

Vj∆ (k , ε) =u((1 + ∆) g ss

jT (k , ε) , (1 + ∆) g ssjN (k , ε) , g ss

j` (k , ε))

+ βEε′|εVj∆

(g ssjk (k , ε) , ε′

).

I If ∆ > 0, then the household supports tariffs. If ∆ < 0, then

it does not.34 / 42

Welfare

I lowest average welfare with wasteful government spending

I labor income tax reduction delivers higher average welfare

than capital income tax reduction.

I small average welfare increase from lump-sum redistribution

Table: Average Welfare

Govt expenditure −3.13

Capital inc. tax −1.52

Labor inc. tax −0.98

Lump-sum tax 0.23

Units: percent.

35 / 42

Welfare across skill type

I absent redistribution, tariffs harm skilled more than unskilled

and poor more than rich

I unskilled benefit from lump-sum redistribution at the expense

of the skilled

Table: Average welfare by skill level

Fiscal policy unskilled skilled

Govt expenditure −2.91 −3.57

Capital inc. tax −1.80 −0.96

Labor inc. tax −0.80 −1.35

Lump-sum tax 1.47 −2.30

Units: percent.

36 / 42

Welfare across the wealth distribution

0 10 20 30Wealth

-4

-2

0

2

Con

sum

ptio

n eq

uiva

lent

(pe

rcen

t)Government expenditureCapital income taxLabor income taxLumpsum transfer

37 / 42

Decomposing welfare changes

We conduct three partial equilibrium exercises to isolate effects

on welfare from three channels

PTcT + cN + PX (k ′ − k) ≤ w̃j`ε + r̃k + T

I Expenditure channel: PT ↑ makes tradable consumption more

expensive.

I Poor vs. Wealthy

38 / 42




PTcT + cN + PX (k ′ − k) ≤ w̃j`ε + r̃k + T

I Investment channel: PX ↑ makes accumulating capital more

expensive

I Savers vs. Dissavers

38 / 42




PTcT + cN + PX (k ′ − k) ≤ w̃j`ε + r̃ k + T

I Factor price channel: w̃j and r̃ change

I Labor vs Capital

I Skilled vs Unskilled

38 / 42

Welfare by channel (government spending)

(a) Total

0 10 20 30Wealth

-4

-2

0

2

Con

sum

ptio

n eq

uiva

lent

(pe

rcen

t)

Low prod. (skilled)High prod. (skilled)Low prod. (unskilled)High prod. (unskilled)

(b) Expenditure

0 10 20 30Wealth

-4

-3

-2

-1

0

Con

sum

ptio

n eq

uiva

lent

(pe

rcen

t)

(c) Investment

0 10 20 30Wealth

-2

-1

0

1

2

Con

sum

ptio

n eq

uiva

lent

(pe

rcen

t)

(d) Factor price

0 10 20 30Wealth

-4

-2

0

2

4

Con

sum

ptio

n eq

uiva

lent

(pe

rcen

t)

39 / 42

Decomposition of welfare changes for unskilled

Channels

Low wealth High wealth

AverageLow prod. High prod. Low prod. High prod.

Expenditure −3.49 −2.50 −2.40 −2.27 −2.75

Investment −0.08 −0.58 1.54 0.67 0.32

Factor priceGovt Expend −0.53 −0.29 −0.35 −0.04 −0.47

Capital inc. tax 0.09 0.90 2.13 2.45 0.71

Labor inc. tax 2.24 2.34 0.18 0.86 1.69

Lump-sum redist. −0.15 0.14 −0.34 0.13 −0.18

AllGovt Expend. −4.09 −3.37 −1.25 −1.69 −2.91

Capital inc. tax −3.49 −2.28 1.14 0.67 −1.80

Labor inc. tax −1.40 −0.81 −0.70 −0.78 −0.80

Lump-sum redist. 3.98 −0.05 1.20 0.29 1.47

Units: percent.

40 / 42

Decomposition of welfare changes for skilled

Table: Decomposition of welfare changes for skilled

Channels

Low wealth High wealth

AverageLow prod. High prod. Low prod. High prod.

Expenditure −2.48 −2.12 −2.16 −2.06 −2.20

Investment −0.08 −0.63 1.35 0.34 0.37

Factor priceGovt Expend −2.01 −1.69 −1.51 −1.03 −1.74

Capital inc. tax 0.21 1.12 1.41 2.17 0.95

Labor inc. tax 1.04 1.19 −0.26 0.47 0.52

Lump-sum redist. −2.20 −1.82 −1.76 −1.15 −1.95

AllGovt Expend. −4.52 −4.41 −2.35 −2.78 −3.57

Capital inc. tax −2.36 −1.74 0.52 0.28 −0.96

Labor inc. tax −1.55 −1.61 −1.09 −1.30 −1.35

Lump-sum redist. −1.94 −3.45 −1.28 −2.08 −2.30

Units: percent.

41 / 42

Conclusion

I Without redistribution . . .

I bilateral tariffs generate large welfare losses regardless of

income/wealth/skill, but especially hurts the poor

I raises the cost of their consumption

I do not benefit from selling capital

I their wage falls

I With redistribution . . .

I capital income tax reduction leads to highest aggregate

economic activity, but lowest average welfare (really hurts the

poor)

I Lump-sum rebating tariff revenue can produce a welfare gain

on average, but at the expense of skilled

42 / 42

Appendix

42 / 42

Tradability measures back

CEX item IO itemmax(exp, imp)

production

exp + imp∗

productionTradable

Men’s suits Apparel manufacturing 5.60 7.35 yes

Calculators Other comm and service 0.23 0.57 yes

industry machinery mfg.

Airline fares Air transportation 0.20 0.36 yes

Plastic dinnerware Oth. plastics prod. mfg. 0.12 0.29 yes

Paint, wallpaper, Paint and coating mfg. 0.09 0.13 no

and supplies

Office Office furniture, custom 0.08 0.11 no

furniture architectural woodwork,

and millwork mfg.

Newspaper subscr. Newspaper publishers 0.03 0.03 no

Dining out Restaurants 0.00 0.00 no

I ∗ : direct and indirect imports

43 / 42

Tradable shares, wealth, and income back

Tradable expenditure share (percent)

(1) (2) (3) (4)

PSID PSID CEX CEX

ln(Wealth) –1.03∗∗∗ –0.64∗∗∗ –1.12∗∗∗ –0.37∗∗∗

(0.04) (0.05) (0.04) (0.04)

ln(Income) –0.20∗∗ –0.46∗∗∗ –0.24∗ –1.17∗∗∗

(0.09) (0.10) (0.13) (0.14)

College –2.77∗∗∗ –3.31∗∗∗

(0.15) (0.19)

Homeowner –1.31∗∗∗ –6.06∗∗∗

(0.19) (0.21)

Other controls no yes no yes

N 30244 30228 23484 23484

Adj. R2 0.036 0.066 0.076 0.167

Standard errors in parentheses. All regressions include year fixed effects.

Other controls include fixed effects for age and household size.

∗ p < 0.10, ∗∗ p < 0.05, ∗ ∗ ∗ p < 0.01

44 / 42

Sensitivity analysis back

Tradable expenditure share (percent)

(1) (2) (3) (4) (5) (6)

PSID PSID PSID CEX CEX CEX

no housing no partial adj. total lab. inc. no housing total lab. inc. alt. tradability

ln(Wealth) –0.84∗∗∗ –0.76∗∗∗ –0.76∗∗∗ –1.00∗∗∗ –0.34∗∗∗ –0.17∗∗∗

(0.07) (0.05) (0.05) (0.04) (0.04) (0.04)

ln(Income) –2.14∗∗∗ –0.66∗∗∗ –0.41∗∗∗ –2.50∗∗∗ –1.03∗∗∗ –0.24∗

(0.14) (0.10) (0.08) (0.15) (0.11) (0.14)

N 30220 30228 28212 23387 21934 23484

Adj. R2 0.047 0.079 0.072 0.254 0.167 0.163

Standard errors in parentheses. ∗ p < 0.10, ∗∗ p < 0.05, ∗ ∗ ∗ p < 0.01

All regressions include year, age, household size, education, and homeowner fixed effects.

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Wealth distribution

I Wealth Gini in model: 0.59

Figure: Data

0

5

10

15

20

wea

lth (P

SID

, uni

ts: G

DP

per c

apita

)

10 20 30 40 50 60 70 80 90wealth percentiles

Figure: Model

0

5

10

15

20

wea

lth (P

SID

, uni

ts: G

DP

per c

apita

)

10 20 30 40 50 60 70 80 90wealth percentiles

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On the Distributional Effects of International Tariffs

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