The social footprint of globalization: towards the introduction of strategic industries in quantitative trade models

Italo Colantone, Gianmarco Ireo Paolo Ottaviano and Piero Stanig

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We argue that our understanding of industrial policy in the presence of 'strategic' industries that exert positive externalities on the national economy may benefit from an extension of quantitative general equilibrium trade models making the extent and pattern of trade-induced re-allocations more salient. To make these features relevant for national welfare, we introduce the notion of the 'social footprint' of globalization as the result of suboptimal trade-induced structural transformation in the presence of externalities. For proof of concept, we use simple workhorse models featuring two countries and two industries (only one of which is 'strategic') to highlight the role of the 'scale elasticity' of the strategic industry and the consequences of the most common assumptions on market structure in quantitative trade analyses.

Keywords: globalization; quantitative trade models; trade liberalization; market structure; externalities; strategic industries (search for similar items in EconPapers)
JEL-codes: F00 F11 F12 F15 F17 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2024-01-17
New Economics Papers: this item is included in nep-int
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