The 2016 Austin Robinson Memorial Prize was awarded to Sergey Nigai (ETH Zurich) at the Royal Economic Society''s 2017 Conference for his article: ''On Measuring the Welfare Gains from Trade Under Consumer Heterogeneity.''
The editors commented: “This paper deals with the very topical free trade policies. Surveys show that highly educated and relatively high earning individuals have very different views on globalization and free trade than less highly educated and low earning individuals. In this paper, the author develops the idea that even in a situation without asymmetric wage shocks the gains from trade are unevenly distributed over individuals. The main reason is the existence of consumer specific price effects. To analyze this further, the author developed a very detailed general equilibrium model of trade that combines consumer heterogeneity in terms of their labour endowment and in terms of their preferences that allow for different income effects for different commodities. The model is applied to a rich data set that combines country and sector specific information on trade, production, expenditures, income distributions and tariffs for 92 countries, that contain the world''s largest economies. The analysis convincingly demonstrated that the conventional assumption of a representative consumer leads to strongly biased estimates of the welfare gains from trade for different consumers. Noteworthy is that this assumption is often used in actual trade models guiding trade negotiations. As such, the importance of this paper cannot be underestimated.”
