Innovation and the trade elasticity

Loris Rubini

Journal of Monetary Economics, 2014, vol. 66, issue C, 32-46

Abstract: The reaction of trade volumes to tariffs is far larger than what current models predict. One reason for this is that they abstract from endogenous productivity choices (“innovation”), which amplify this reaction. To show this, I develop a model of international trade with innovation, and calibrate it to Canada and United States before the Free Trade Agreement. Feeding in the tariff drops observed during the agreement, the increase in the trade volumes is within the empirical estimates. Without innovation, the change in trade volumes is too low, and similar to what current models without innovation have found.

Keywords: Canada-U.S. Free Trade Agreement; Innovation and trade; Trade elasticity (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393214000518
Full text for ScienceDirect subscribers only

Related works:
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:eee:moneco:v:66:y:2014:i:c:p:32-46

DOI: 10.1016/j.jmoneco.2014.04.002

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().