Use Of Quantitative Trade Models On Aggregate Bilateral Trade Flows, Income, And Welfare

970 Words Aug 13th, 2015 4 Pages
This paper builds on the previous literature which uses quantitative trade models to determine the effects of trade barriers on aggregate bilateral trade flows, income, and welfare, including Eaton and Kortum (2002); Anderson and van Wincoop (2003); Alvarez and Lucas (2007); and Helpman et al. (2008) and more recent papers that address discrepancies between more traditional quantitative trade models and the data. 3 The main contribution of my paper to this literature is that it demonstrates how the workhorse class of quantitative trade models can be generalized to account for the aggregate effects of non-trivial patterns of product-level comparative advantage. It does so in a way that maintains, to a large extent, the tractability and parsimony of this class of models while utilizing the wealth of information contained in product-level trade data, which is available for most of the world’s countries. It also provides succinct and intuitive expressions relating the gains from trade to countries’ patterns of product-level comparative advantage, allowing for a straightforward decomposition of the gains from trade into across-product and within-product components.
This paper is also related to Arkolakis et al. (2012) in that both papers address important features shared among the literature’s workhorse class of quantitative trade models, but we make very distinct points. Arkolakis et al. (2012) demonstrate that, in this class of models, the welfare gains from trade depend only…
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