Gains from Trade: Does Sectoral Heterogeneity Matter?

Rahul Giri, Kei-Mu Yi and Hakan Yilmazkuday

No 26741, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper assesses the quantitative importance of including sectoral heterogeneity in computing the gains from trade. Our framework draws from Caliendo and Parro (2015) and has sectoral heterogeneity along five dimensions, including the elasticity of trade to trade costs. We estimate the sectoral trade elasticity with the Simonovska and Waugh (2014) simulated method of moments estimator and micro price data. Our estimates range from 2.97 to 8.94. Our benchmark model is calibrated to 21 OECD countries and 20 sectors. We remove one or two sources of sectoral heterogeneity at a time, and compare the gains from trade to the benchmark model. We also compare an aggregate model with a single elasticity to the benchmark model. Our main result from these counterfactual exercises is that sectoral heterogeneity does not always lead to an increase in the gains from trade, which is consistent with the theory.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-int
Note: ITI
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Citations: View citations in EconPapers (9)

Published as Giri, Rahul & Yi, Kei-Mu & Yilmazkuday, Hakan, 2021. "Gains from trade: Does sectoral heterogeneity matter?," Journal of International Economics, Elsevier, vol. 129(C).

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Related works:
Journal Article: Gains from trade: Does sectoral heterogeneity matter? (2021)
Working Paper: Gains from Trade: Does Sectoral Heterogeneity Matter? (2021)
Working Paper: Gains from Trade: Does Sectoral Heterogeneity Matter? (2018)
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