Functional Forms for Tractable Economic Models and the Cost Structure of International Trade

Michal Fabinger and E. Glen Weyl
Additional contact information
Michal Fabinger: Faculty of Economics, The University of Tokyo
E. Glen Weyl: Microsoft Research New York City and Department of Economics, Princeton Unviersity

No CIRJE-F-1092, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We present functional forms allowing a broader range of analytic solutions to common economic equilibrium problems. These can increase the realism of pen-and-paper solutions or speed large-scale numerical solutions as computational subroutines. We use the latter approach to build a tractable heterogeneous firm model of international trade accommodating economies of scale in export and diseconomies of scale in production, providing a natural,unified solution to several puzzles concerning trade costs. We briefly highlight applications in a range of other fields. Our method of generating analytic solutions is a discrete approximation to a logarithmically modified Laplace transform of equilibrium conditions.

Pages: 100 pages
Date: 2018-08
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Citations: View citations in EconPapers (5)

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