VOLUME XII
AUTUMN 2004

NON-HOMOTHETIC PREFERENCES, INCOME DITRIBUTION AND BILATERAL TRADE
 
CARMEN FILLAT CASTEJÓN
Universidad de Zaragoza
 
The fundamentals of international trade related to demand features, such as development levels, non-homothetic preferences or income distribution, have often been ignored in the literature, ever since the original work by Linder intuitively suggested these determinants. This paper presents an empirical model inspired by the gravity equation and in line with Linder´s thesis, with economic size and non-homothetic preferences determining the structure of domestic demand, and with geographical distance shaping the international trade horizons. Income distribution, economic convergence and product differentiation are also considered. The model is tested for Spanish foreign trade in manufactures (1960-1985) and the results confirm the relevance of demand determinants, mainly non-homothetic preferences and income distribution.
 
Key words: international trade, economic development, demand, economic convergence, manufactures.
JEL classification: C33, F10, F14, F43.

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