We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large inefficiencies associated with markups, and (ii) a weak pattern of cross-country comparative advantage in individual sectors. We find strong evidence for both of these ingredients using producer-level data for Taiwanese manufacturing establishments. Parameterizations of the model consistent with this data thus predict large pro-competitive gains from trade, much larger than those in standard Ricardian models. In stark contrast to standard Ricardian models, data on changes in trade volume are not sufficient for determining the gains from trade.

This paper studies endogenous information manipulation in games where a population can overthrow a regime if individuals coordinate. The benchmark game has a unique equilibrium and in this equilibrium propaganda is effective if signals are sufficiently precise. Despite playing against perfectly rational individuals, a regime is able to manipulate information in a way that exploits heterogeneity in individual beliefs so that at equilibrium its chances of surviving are higher than they otherwise would be. This result is robust to alternative payoffs where the regime cares only for survival and to a number of alternative information structures, including situations where individuals have access to high-quality private information that is entirely uncontaminated by the regime.Keywords: global games, hidden actions, signal-jamming, propaganda, bias.JEL classifications: C72, D82, D84.In coordination games, the information available to agents is a crucial determinant of equilibrium outcomes. Typically, the truthfulness of that information is never in question. But when some players choose what information to release, that information is likely to be biased.1 The optimal amount of bias used by senders of information will depend on the way that receivers typically filter their information. In many settings, receivers find it easy to infer bias from their signals and information manipulation has no effect on equilibrium beliefs. In a coordination setting, however, the way that an individual receiver filters information will also depend on the filtering behavior of others. In equilibrium, senders may be able to manipulate information so as to exploit heterogeneity in receivers' beliefs and thereby affect outcomes. * This is an extensively revised version of a chapter from my UCLA dissertation. Previous versions of this paper circulated under the title 'Information and the limits to autocracy'.

for their comments. Edmond thanks the Australian Research Council for financial support under grant DP-150101857. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large inefficiencies associated with markups, and (ii) a weak pattern of cross-country comparative advantage in individual sectors. We find strong evidence for both of these ingredients using producer-level data for Taiwanese manufacturing establishments. Parameterizations of the model consistent with this data thus predict large pro-competitive gains from trade, much larger than those in standard Ricardian models. In stark contrast to standard Ricardian models, data on changes in trade volume are not sufficient for determining the gains from trade.

This paper studies endogenous information manipulation in games where a population can overthrow a regime if individuals coordinate. The benchmark game has a unique equilibrium and in this equilibrium propaganda is effective if signals are sufficiently precise. Despite playing against perfectly rational individuals, a regime is able to manipulate information in a way that exploits heterogeneity in individual beliefs so that at equilibrium its chances of surviving are higher than they otherwise would be. This result is robust to alternative payoffs where the regime cares only for survival and to a number of alternative information structures, including situations where individuals have access to high-quality private information that is entirely uncontaminated by the regime.Keywords: global games, hidden actions, signal-jamming, propaganda, bias.JEL classifications: C72, D82, D84.In coordination games, the information available to agents is a crucial determinant of equilibrium outcomes. Typically, the truthfulness of that information is never in question. But when some players choose what information to release, that information is likely to be biased.1 The optimal amount of bias used by senders of information will depend on the way that receivers typically filter their information. In many settings, receivers find it easy to infer bias from their signals and information manipulation has no effect on equilibrium beliefs. In a coordination setting, however, the way that an individual receiver filters information will also depend on the filtering behavior of others. In equilibrium, senders may be able to manipulate information so as to exploit heterogeneity in receivers' beliefs and thereby affect outcomes. * This is an extensively revised version of a chapter from my UCLA dissertation. Previous versions of this paper circulated under the title 'Information and the limits to autocracy'.