Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Investing

More on Free Trade’s “Pro-Poor Bias”

by March 29, 2024
March 29, 2024
More on Free Trade’s “Pro-Poor Bias”

Scott Lincicome

Among the research I commended in the 2024 Economic Report of the President (ERP) last week was a solid section on free trade’s “pro‐​poor bias,” i.e., that eliminating US government barriers to cross‐​border commerce disproportionately benefited Americans with lower incomes. This week, the Federal Reserve Bank of Minneapolis highlights a brand new paper showing much the same thing (emphasis mine):

In a Minneapolis Fed staff report, Monetary Advisor Michael Waugh models how lower trade costs play out for richer and poorer households (Staff Report 653, “Heterogeneous Agent Trade”). Waugh finds starkly different effects, with poor households (defined by their level of consumer spending) gaining much more as freer trade lowers prices.

The reason is not that poorer households buy a larger proportion of imported goods. Rather, it is their higher marginal utility of consumption: Falling prices provide more value to households with tighter budgets, as evidenced by their sensitivity to prices. Low‐​income households react more strongly as trade drives down the prices of imports and competing domestic goods. These households increase their consumption more as their buying power increases, and they are quicker to substitute new products in pursuit of savings.

Waugh finds that all US households benefit from a 10 percent reduction in US trade costs. But the poorest fifth of households experience a welfare gain more than 4.5 times larger than the richest.

Given the ample academic research cited in the ERP, these new findings, while welcome, are unsurprising. However, they do raise the following question related to the 2024 US presidential campaign: If an across‐​the‐​board 10 percent reduction in US trade costs generates outsized gains for America’s poor, what does an across‐​the‐​board 10 percent increase in those same costs—say, via the universal tariff proposed by Donald Trump—do?

For more on the benefits of free trade and the costs of protectionism, be sure to check out Cato’s ongoing Defending Globalization project or this 2022 Cato paper from me and Alfredo Carrillo Obregon.

0
FacebookTwitterGoogle +Pinterest
previous post
Ninth Circuit: Prop 65 Warnings Can Count As Compelled Speech
next post
Buy Breakout or Fade Divergence on Growth Stocks?

You may also like

Jones Act Loophole Allows Puerto Rico to Finally...

March 26, 2025

Fiscal Accountability and Enhancing the CBO’s Role in...

September 11, 2024

DOGE Recommendations: Reform the Tax Treatment of Health...

December 16, 2024

Friday Feature: Education Collaboration Network

March 7, 2025

Freedom, Not Tariff, Is the Most Beautiful Word...

March 10, 2025

Senate Turns to Credit Cards in Biden’s “War...

May 14, 2024

Employee Retention Credit Shows Folly of Tax Code...

October 12, 2023

Small Businesses Confront the Tariff Onslaught

May 5, 2025

New State Department Regulations Could End the Au...

November 21, 2023

Terrorist Entry Through the Southwest Border

September 15, 2023

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • House Dems urge GOP to condemn DHS for handcuffing Rep Nadler staffer, order Noem to testify

      June 3, 2025
    • EXCLUSIVE: Comer hails DOJ’s Biden probe as House investigation heats up

      June 3, 2025
    • Trump reaffirms hard-line on Iran nuclear deal: ‘will not allow any enrichment of uranium’

      June 3, 2025
    • Trump criticizes Rand Paul over tax bill opposition: ‘Votes no on everything’

      June 3, 2025
    • HHS ends Biden-era COVID-19 testing program that bled taxpayers years after pandemic

      June 3, 2025
    • The FTC Event that Wasn’t: The Attention Economy Workshop Misses an Opportunity for Meaningful Discussion

      June 3, 2025

    Categories

    • Business (8,129)
    • Investing (2,003)
    • Politics (15,490)
    • Stocks (3,122)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved