Welfare in models of trade with heterogeneous firms

Alexandre Janiak

No 253, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile

Abstract: I illustrate that the welfare improvement property of the Melitz model is due to the shape of the aggregate labor demand curve, which slopes upwards. By slightly changing some assumptions in the model, this curve may have a negative slope. In this case, increases in aggregate productivity result in a reduction in welfare. For example, this may occur when fixed costs are measured in units of aggregate output instead of labor.JEL codes: F12, F16, J23.

Date: 2008
New Economics Papers: this item is included in nep-int
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Working Paper: Welfare in Models of Trade with Heterogeneous Firms (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:edj:ceauch:253

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