Trade Models, Trade Elasticities, and the Gains from Trade / Ina Simonovska, Michael E. Waugh.

Format:

Book

Author/Creator:

Simonovska, Ina.

Contributor:

National Bureau of Economic Research.

Waugh, Michael E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20495.

NBER working paper series no. w20495

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

We argue that the welfare gains from trade in new models with micro-level margins exceed those in frameworks without these margins. Theoretically, we show that for fixed trade elasticity, different models predict identical trade flows, but different patterns of micro-level price variation. Thus, given data on trade flows and micro-level prices, different models have different implied trade elasticities and welfare gains. Empirically, models with extensive or variable mark-up margins yield significantly larger welfare gains. The results are robust to incorporating into the estimation moment conditions that use trade-flow and tariff data, which imply a common trade elasticity across models.

Notes:

Print version record

September 2014.