EconPapers    
Economics at your fingertips  
 

Distorted Gravity: The Intensive and Extensive Margins of International Trade

Thomas Chaney ()

Sciences Po publications from Sciences Po

Abstract: By considering a model with identical firms, Krugman (1980) predicts that a higher elasticity of substitution between goods magnifies the impact of trade barriers on trade flows. In this paper, I introduce firm heterogeneity in a simple model of international trade. I prove that the extensive margin and the intensive margin are affected by the elasticity of substitution in exact opposite directions. When the distribution of productivity across firms is Pareto, the predictions of the Krugman model with representative firms are overturned: the impact of trade barriers on trade flows is dampened by the elasticity of substitution, and not magnified.

JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2008-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (311) Track citations by RSS feed

Published in American Economic Review, 2008, vol. 98, pp.1707-1721

Downloads: (external link)
https://spire.sciencespo.fr/hdl:/2441/6apm7lruv088 ... istorted-gravity.pdf (application/pdf)

Related works:
Journal Article: Distorted Gravity: The Intensive and Extensive Margins of International Trade (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spo:wpmain:info:hdl:2441/6apm7lruv088iagm4rv2c33jtg

Access Statistics for this paper

More papers in Sciences Po publications from Sciences Po Contact information at EDIRC.
Bibliographic data for series maintained by Spire @ Sciences Po Library ().

 
Page updated 2019-04-15
Handle: RePEc:spo:wpmain:info:hdl:2441/6apm7lruv088iagm4rv2c33jtg