The Simple Analytics of the Melitz Model in a Small Open Economy

Svetlana Demidova and Andrés Rodríguez-Clarez
Authors registered in the RePEc Author Service: Andres Rodriguez-Clare

No 17521, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we present a version of the Melitz (2003) model for the case of a small economy and summarize its key relationships with the aid of a simple figure. We then use this figure to provide an intuitive analysis of the implications of asymmetric changes in trade barriers and show that a decline in import costs always benefits the liberalizing country. This stands in contrast to variants of the Melitz model with a freely traded (outside) sector, such as Demidova (2008) and Melitz and Ottaviano (2008), where the country that reduces importing trade costs experiences a decline in welfare.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-cis, nep-int and nep-opm
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published as “The Simple Analytics of the Melitz Model in a Small Economy” (with Andrés Rodríguez-Clare), Journal of International Economics, July 2013, 90(2), pp. 266-272

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