1,721,000 research outputs found
Heckscher-Ohlin and Agglomeration
No full textWe argue that embedding endowment-based comparative advantage within a standard NEG framework helps solve the indeterminacy due to multiple equilibria and the ambiguity concerning the relation between integration and specialisation (monotonicity versus non-monotonicity) typical of the NEG literature. In particular, we show that if endowments are in the FPE set, the process of trade integration involves an overshooting of international specialisation and relative factor prices with respect to the free trade level determined by factor abundance. In contrast, if endowments are outside the FPE set, then, even in the presence of agglomeration forces, specialisation and factor prices are monotonically related to trade costs, as implied by the standard trade theory. We argue that the model can shed light on some puzzling stylised facts
Productivity, Quality and Export Behaviour
No full textWe find a robust negative correlation between Italian firms' productivity and their export share to low-income destinations. To account for this surprising fact, we marry Verhoogen (2008) with Eaton et al. (2011), by introducing firm heterogeneity in product quality and country heterogeneity in quality consumption in a framework featuring firm- and market-specific shocks in entry costs and demand, and structurally estimate the model's parameters by the simulated method of moments. The estimated preference for quality turns out to be monotonically increasing in foreign destinations' income. The model also predicts a negative correlation between firms' R&D intensity and their export share to low-income destinations, a finding supported by our data. Overall, our results strongly suggest high-quality firms to concentrate their sales in high-income markets
The Skill Bias of World Trade
No full textThis article suggests that international trade, even between identical countries, can raise the relative demand for skilled labour. It shows that a simple generalisation of Krugman’s (1979) model of trade in differentiated products has implications for the skill premium, through economies of scale rather
than Hecksher-Ohlin effects, that are consistent with a number of stylised facts. It provides new evidence in support of these results by showing that increases in market size lead to higher returns to education, skill premia and income inequality
Monopolistic Competition: CES Redux?
No full textWe study the competitive and reallocation effects of trade opening in monopolistic competition. To this purpose,
we generalize the Melitz (2003) setup with heterogeneous firms and fixed and variable trade costs beyond the
CES to the case of additively separable utility functions. We find that extensive margin (Melitz-type selection)
effects are robust to relaxing the CES assumption. Intensive margin effects (market share reallocations across
inframarginal firms) and competitive (markup) effects are instead fragile. An important implication is that
measured productivity gains from trade opening are no longer ensured with non-CES preferences. We discuss
our results in the light of alternative setups featuring non-additive preferences, strategic interaction and
consumers' preference for an ideal variety
Trade Imbalances, Export Structure and Wage Inequality
No full textWe study, both theoretically and empirically, how trade imbalances affect the structure of countries’ exports and wage inequality. We show that, in a Heckscher–Ohlin model with a continuum of goods, a Southern (Northern) trade surplus leads to an increase (reduction) in the average skill intensity of exports, in the relative demand for skills and in the skill premium in both countries. We provide robust support for the mechanism underlying these predictions using a large panel of countries observed over the past 30 years. Our results suggest that the large and growing North–South trade imbalances arisen over the last three decades may have exacerbated wage inequality worldwide
Trade, Markup Heterogeneity and Misallocations
Full text linkMarkups vary widely across industries and countries, their heterogeneity has increased overtime and asymmetric exposure to international trade seems partly responsible for this phenomenon. In this paper, we study how the entire distribution of markups affects resource misallocation and welfare in a general equilibrium framework encompassing a large class of models with imperfect competition. We then identify conditions under which trade opening, by changing the distribution of markups, may reduce welfare. Our approach is novel both in its generality and in the emphasis on the second moment of the markup distribution. Two broad policy recommendations stand out from the analysis. First, whenever there is heterogeneity in markups, be it due to trade or other distortions, there is also an intersectoral misallocation, so that the equilibrium can be improved upon with an appropriate intervention. This suggests that trade liberalization and domestic industrial policy are complementary. Second, ensuring free entry is a crucial precondition to prevent adverse effects from asymmetric trade opening
"GATT-think" with Asymmetric Countries
No full textWe argue that a trade agreement which conforms to GATT's reciprocity rule benefits the (stronger) less trade-dependent country at the expense of the (weaker) more trade-dependent country. Reciprocity is so unfavorable to the weaker country that it may be worse off under reciprocity than under the Nash- bargaining solution, a "power-based" approach to trade negotiations that reflects power asymmetries among trading partners. Our results question Bagwell and Staiger's (1999 , 2000 ) view of reciprocity as a rule that "serves to mitigate the influence of power asymmetries on negotiated outcomes." Copyright � 2006 The Authors; Journal compilation � 2006 Blackwell Publishing Ltd.
Increasing Returns, Imperfect Competition, and Factor Prices
No full textWe show how, in general equilibrium models featuring increasing returns, imperfect competition, and endogenous markups, changes in the scale of economic activity affect the income distribution across factors. Whenever final goods are gross substitutes (gross complements), a scale expansion raises (lowers) the relative reward of the scarce factor or the factor used intensively in the sector characterized by a higher degree of product differentiation and higher fixed costs. Under very reasonable hypotheses, our theory suggests that scale is skill-biased. This result provides a micro foundation for the secular increase in the relative demand for skilled labor. Moreover, it constitutes an important link among major explanations for the rise in wage inequality: skill-biased technical change, capital-skill complementarities, and international trade. We provide new evidence on the mechanism underlying the skill bias of scale. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Trade, migration and regional unemployment
No full textWe formulate a dynamic core-periphery model with frictions in the job matching pro-cess to study the interplay between trade costs, migration and regional unemployment in the short- and long-run. We Þnd that the spatial distribution of unemployment mir-rors (inversely) the distribution of economic activities. Further, we highlight a contrast between the short-run and the long-run effects of trade-induced migration on regional unemployment. In particular, an inßow of immigrants from the periphery into the core reduces the unemployment gap in the short-run, but exacerbates unemployment dispari-ties in the long-run. JEL classiÞcation: F12, F15, F16
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