Welfare enhancing uncertainty
Additional contact information
Sravaitri Chaudhuri: Economics Department, Calcutta University, Kolkata, India
Theoretical and Applied Economics, 2020, vol. XXVII, issue 4(625), Winter, 73-88
In this paper it is shown that one of the intrinsic characteristics of the canonical Melitz (2003) type framework is that inclusion of further uncertainties enhances the aggregate welfare of the given economy, though reducing the total varieties available. Here the uncertainty assumed is, payment risk associated with the exchange in international market. The key to such an occurrence is the fact that uncertainty acts like an increased trade costs leading to added exit of low productive firms. Since uncertainty seems to be desirable any efforts to decrease such can be deemed expensive. However, this also proves for a fact that the developing countries with overall lower productivity and higher uncertainty will lose out its import and export share to international competition in the global market.
Keywords: firm heterogeneity; payment uncertainty; welfare. (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:4(625):y:2020:i:4(625):p:73-88
Access Statistics for this article
Theoretical and Applied Economics is currently edited by Marin Dinu
More articles in Theoretical and Applied Economics from Asociatia Generala a Economistilor din Romania - AGER Contact information at EDIRC.
Bibliographic data for series maintained by Marin Dinu ().