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Goods-Market Frictions and International Trade

Pawel Krolikowski () and Andrew H. McCallum

No 1207, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We present a tractable framework that embeds goods-market frictions in a general equilibrium dynamic model with heterogeneous exporters and identical importers. These frictions arise because it is time consuming and expensive for exporters and importers to meet. We show that search frictions lead to an endogenous fraction of unmatched exporters, alter the gains from trade, endogenize entry costs, and imply that the competitive equilibrium does not generally result in the socially optimal number of searching firms. Finally, ignoring search frictions results in biased estimates of the effect of tariffs on trade flows.

Keywords: Search; Trade; Goods; Frictions; Information (search for similar items in EconPapers)
JEL-codes: D83 F12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-dge and nep-int
Date: 2017-05-23
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https://www.federalreserve.gov/econres/ifdp/files/ifdp1207.pdf (application/pdf)

Related works:
Working Paper: Goods-Market Frictions and International Trade (2018) Downloads
Working Paper: Goods-Market Frictions and International Trade (2018) Downloads
Working Paper: Goods-Market Frictions and International Trade (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1207

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DOI: 10.17016/IFDP.2017.1207

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