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Trade Models, Trade Elasticities, and the Gains from Trade

Ina Simonovska () and Michael Waugh

No 20495, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We argue that the welfare gains from trade in new models with micro-level margins exceed those in frameworks without these margins. Theoretically, we show that for fixed trade elasticity, different models predict identical trade flows, but different patterns of micro-level price variation. Thus, given data on trade flows and micro-level prices, different models have different implied trade elasticities and welfare gains. Empirically, models with extensive or variable mark-up margins yield significantly larger welfare gains. The results are robust to incorporating into the estimation moment conditions that use trade-flow and tariff data, which imply a common trade elasticity across models.

JEL-codes: F10 F11 F14 F17 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-int
Note: ITI
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Working Paper: Different Trade Models, Different Trade Elasticities? (2012) Downloads
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