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Allocative Efficiency, Mark-ups, and the Welfare Gains from Trade / Thomas J. Holmes, Wen-Tai Hsu, Sanghoon Lee.
- Format:
- Book
- Author/Creator:
- Holmes, Thomas J.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w19273.
- NBER working paper series no. w19273
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2013.
- Summary:
- This paper develops an index of allocative efficiency that depends upon the distribution of mark-ups across goods. It determines how changes in trade frictions affect allocative efficiency in an oligopoly model of international trade, decomposing the effect into the cost-change channel and the price-change channel. Formulas are derived shedding light on the signs and magnitudes of the two channels. In symmetric country models, trade tends to increase allocative efficiency through the cost-change channel, yielding a welfare benefit beyond productive efficiency gains. In contrast, the price-change channel has ambiguous effects on allocative efficiency.
- Notes:
- Print version record
- August 2013.
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