Gains from Trade: Does Sectoral Heterogeneity Matter? / Rahul Giri, Kei-Mu Yi, Hakan Yilmazkuday.

Format:

Book

Author/Creator:

Giri, Rahul.

Contributor:

National Bureau of Economic Research.

Yi, Kei-Mu.

Yilmazkuday, Hakan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26741.

NBER working paper series no. w26741

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Gains from Trade

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

This paper assesses the quantitative importance of including sectoral heterogeneity in computing the gains from trade. Our framework draws from Caliendo and Parro (2015) and has sectoral heterogeneity along five dimensions, including the elasticity of trade to trade costs. We estimate the sectoral trade elasticity with the Simonovska and Waugh (2014) simulated method of moments estimator and micro price data. Our estimates range from 2.97 to 8.94. Our benchmark model is calibrated to 21 OECD countries and 20 sectors. We remove one or two sources of sectoral heterogeneity at a time, and compare the gains from trade to the benchmark model. We also compare an aggregate model with a single elasticity to the benchmark model. Our main result from these counterfactual exercises is that sectoral heterogeneity does not always lead to an increase in the gains from trade, which is consistent with the theory.

Notes:

Print version record

February 2020.