Aggregating from micro to macro patterns of trade

Stephen Redding and David Weinstein

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We develop a new framework for aggregating from micro to macro patterns of trade. We derive price indexes that determine comparative advantage across countries and sectors and the aggregate cost of living. If firms and products are imperfect substitutes, we show that these price indexes depend on variety, average demand/quality and the dispersion of demand/quality-adjusted prices, and are only weakly related to standard empirical measures of average prices, thereby providing insight for elasticity puzzles. Of the cross-section (time-series) variation in comparative advantage, 50 (90) percent is accounted for by variety and average demand/quality, with average prices contributing less than 10 percent.

Keywords: comparative advantage; trade; prices; quality; variety (search for similar items in EconPapers)
JEL-codes: F11 F12 F14 (search for similar items in EconPapers)
Date: 2017-11-16
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (25)

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https://cep.lse.ac.uk/pubs/download/dp1513.pdf (application/pdf)

Related works:
Working Paper: Aggregating From Micro to Macro Patterns of Trade (2018)
Working Paper: Aggregating From Micro to Macro Patterns of Trade (2017)
Working Paper: Aggregating from micro to macro patterns of trade (2017)
Working Paper: Aggregating from Micro to Macro Patterns of Trade (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1513

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