A lab-equipment model of growth with heterogeneous firms and asymmetric countries

Takumi Naito

No 18-00009, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: To examine the effects of asymmetric trade liberalization on countries' long-run growth and welfare through intraindustry reallocations, we extend the Rivera-Batiz--Romer lab-equipment model of growth with expanding input varieties to include both heterogeneous firms and asymmetric countries. We first derive extended ACR (Arkolakis--Costinot--Rodriguez-Clare) formulas for long-run growth and welfare changes even with asymmetric countries. In our baseline calculation, the total long-run welfare effect of greater openness (expressed in flow terms) is about four times as large as the static counterpart. Finally, we show that even unilateral trade liberalization always raises both countries' long-run growth and welfare.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2018-08-24
New Economics Papers: this item is included in nep-gro and nep-int
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Related works:
Journal Article: A lab-equipment model of growth with heterogeneous firms and asymmetric countries (2019)
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