EconPapers    
Economics at your fingertips  
 

Distorted Gravity: The Intensive and Extensive Margins of International Trade

Thomas Chaney

SciencePo Working papers Main from HAL

Abstract: By considering a model with identical firms, Krugman (1980) predicts that a higher elasticity of substitution between goods magnifies the impact of trade barriers on trade flows. In this paper, I introduce firm heterogeneity in a simple model of international trade. I prove that the extensive margin and the intensive margin are affected by the elasticity of substitution in exact opposite directions. When the distribution of productivity across firms is Pareto, the predictions of the Krugman model with representative firms are overturned: the impact of trade barriers on trade flows is dampened by the elasticity of substitution, and not magnified.

Date: 2008-09
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03579844
References: Add references at CitEc
Citations: View citations in EconPapers (144)

Published in American Economic Review, 2008, 98 (4), pp.1707 - 1721. ⟨10.1257/aer.98.4.1707⟩

Downloads: (external link)
https://sciencespo.hal.science/hal-03579844/document (application/pdf)

Related works:
Journal Article: Distorted Gravity: The Intensive and Extensive Margins of International Trade (2008) Downloads
Working Paper: Distorted Gravity: The Intensive and Extensive Margins of International Trade (2008) Downloads
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:hal:spmain:hal-03579844

DOI: 10.1257/aer.98.4.1707

Access Statistics for this paper

More papers in SciencePo Working papers Main from HAL
Bibliographic data for series maintained by Contact - Sciences Po Departement of Economics (guillaume.sarratdetramezaigues@sciences-po.org).

 
Page updated 2024-12-28
Handle: RePEc:hal:spmain:hal-03579844