The network origins of the gains from trade

Maarten Bosker and Bastian Westbrock

Journal of Economic Theory, 2024, vol. 216, issue C

Abstract: This paper develops a network perspective on the gains from trade in today's international supply chains. In particular, we demonstrate that the comparative statics predictions of a standard general-equilibrium trade model with input-output linkages can be expressed as a network diffusion model. This model captures the relevant dimensions of the production network's structure by just two easily quantifiable statistics: A country's upstream exposure to supply shocks further up in the network and its downstream exposure to demand shocks further down. We then show how up- and downstream exposure crucially determine the welfare effects from various types of trade cost shocks. In some cases, they even capture the entire welfare effect.

Keywords: Global trade network; Gains from trade; Network diffusion; Trade intermediation (search for similar items in EconPapers)
JEL-codes: F10 F11 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: The network origins of the gains from trade (2019)
Working Paper: The network origins of the gains from trade (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:216:y:2024:i:c:s0022053124000061

DOI: 10.1016/j.jet.2024.105800

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