Micro-level data have had a profound in ‡uence on research in international trade over the last ten years. In many regards, this research agenda has been very successful. New stylized facts have been uncovered and new trade models have been developed to explain these facts. In this paper we investigate to which extent answers to new micro-level questions have a¤ected answers to an old and central question in the …eld: How large are the welfare gains from trade? A crude summary of our results is: "So far, not much."

This paper develops a novel theory of marketing costs within a trade model with product differentiation and heterogeneity in firm productivities. A firm enters a market if it is profitable to incur the marginal cost to reach a single consumer. It then faces an increasing marginal penetration cost to access additional consumers. The model, therefore, can reconcile the observed positive relationship between entry and market size with the existence of many small exporters in each exporting market. Comparative statics of trade liberalization predict a large increase in trade for goods with positive but low volumes of previous trade.

Micro-level data have had a profound influence on research in international trade over the last ten years. In many regards, this research agenda has been very successful. New stylized facts have been uncovered and new trade models have been developed to explain these facts. In this paper we investigate to which extent answers to new micro-level questions have affected answers to an old and central question in the field: How large are the gains from trade? A crude summary of our results is: "So far, not much."

We develop a general equilibrium framework to determine the spatial distribution of economic activity on any surface with (nearly) any geography. Combining the gravity structure of trade with labor mobility, we provide conditions for the existence, uniqueness, and stability of a spatial economic equilibrium and derive a simple set of equations that govern the relationship between economic activity and the geography of the surface. We then use the framework to estimate the topography of trade costs, productivities and amenities in the United States. We find that geographic location accounts for at least twenty percent of the spatial variation in U.S. income. Finally, we calculate that the construction of the interstate highway system increased welfare by 1.1 to 1.4 percent, which is substantially larger than its cost.