Global Gains from Reduction of Trade Costs

Han Qi, Haichao Fan and Edwin Lai ()
Additional contact information
Han Qi: Hong Kong University of Science and Technology

No 1283, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: We derive a simple equation to calculate the global welfare impact of the simultaneous reduction of trade costs between multiple country-pairs. Interestingly, we find that we obtain the same equation for a broad class of trade models. Moreover, balanced trade is mostly not required for the equation to work, nor does trade elasticity need to be known. The global welfare impact only depends on two sets of statistics: (i) the ratio of bilateral trade flow between each pair of trading partners and global income; and (ii) the percentage change in exporting cost for each pair of trading partners. The class of models includes the many-country, many-good neo-classical-type model, and the Armington-type models such as Eaton and Kortum (2002), Krugman (1980), Melitz (2003) with Pareto distribution of firm productivity, and the extensions of these models to the multi-country and multi-sector case, multi-factor production technology, multi-stage production, the existence of intermediate good and the existence of a non-traded good sector in each country. We then apply the equation to estimate the global welfare impact of the worldwide reduction of international shipping costs in the last five decades.

Date: 2013
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2013/paper_1283.pdf (application/pdf)

Related works:
Journal Article: Global gains from reduction in trade costs (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:1283

Access Statistics for this paper

More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().