The consumption side of trade shocks: Inequality dynamics and luxury imports
利用中国加入WTO带来的外生贸易冲击，研究巴西各地区收入、不平等和进口行为的变化，发现贸易冲击加剧了地区内不平等，并推动了奢侈品进口增长，不平等是贸易冲击影响进口需求的关键渠道。
We study how a large, exogenous trade shock — triggered by China’s accession to the WTO in 2001 — reshaped income, inequality, and import behavior across Brazilian regions. Using a shift–share instrument based on pre-shock export structures, we show that regions more exposed to China’s demand boom experienced faster growth in per capita income and larger increases in within-region inequality relative to less exposed areas. These changes, in turn, led to rising import values and shifts in composition, especially toward consumption and medium- to high-tech manufactured goods. To analyze these shifts, we classify goods by necessity and luxury status using Brazilian household data and introduce a complementary classification based on the spending patterns of high-income households in the United States. Luxury imports rose most in regions that were initially more unequal or experienced sharper post-shock inequality growth, consistent with non-homothetic preferences and broader theories of stratified consumption. Our findings highlight inequality as a key channel through which trade shocks shape regional import demand in developing economies. • We exploit China’s WTO entry to study trade shocks across Brazilian regions. • Trade shocks raised average income and inequality in more exposed regions. • These gains reshaped imports, raising values and shifting demand toward consumption and tech goods. • We classify goods using Brazilian and U.S. data and show trade shocks drove luxury import growth in unequal or inequality-rising areas. • Inequality mediates how trade shocks reshape regional import composition.