Capital Accumulation and the Welfare Gains from Trade

Brooks, Wyatt; Pujolás, Pau S.

doi:10.2139/ssrn.2826680

Cited by 6 publications

(7 citation statements)

References 24 publications

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“…Baldwin (1992) and Anderson et al (2015) show that there are large dynamic gains from trade because it encourages capital accumulation and human capital accumulation. Building on this argument, Brooks & Pujolàs (2016) show that gains from trade driven by capital accumulation can be large, even though, in the transition, they are potentially negative. Studying the impact that trade reforms have on the creation of new firms, Alessandria et al (2014) and Alessandria & Choi (2015) show that gains during the transition can be even larger.…”

Section: Quantifying the Gains From Trade And Future Directions For Age Modelsmentioning

confidence: 93%

Quantitative Trade Models: Developments and Challenges

2017

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Applied general equilibrium (AGE) models, which feature multiple countries, multiple industries, and input–output linkages across industries, have been the dominant tool for evaluating the impact of trade reforms since the 1980s. We review how these models are used to perform policy analysis and document their shortcomings in predicting the industry-level effects of past trade reforms. We argue that, to improve their performance, AGE models need to incorporate product-level data on bilateral trade relations by industry and better model how trade reforms lower bilateral trade costs. We use the least-traded-products methodology of Kehoe et al. (2015) to provide guidance on how improvements can be made. We provide further suggestions on how AGE models can incorporate recent advances in quantitative trade theory to improve their predictive ability and better quantify the gains from trade liberalization.

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Section: Quantifying the Gains From Trade And Future Directions For Age Modelsmentioning

confidence: 93%

Quantitative Trade Models: Developments and Challenges

2017

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“…Finally, Alessandria and Choi (), Alessandria et al. (), and Brooks and Pujolas () show that the gains from trade that arise after a trade liberalization are larger when dynamics are taken into account.…”

Section: Introductionmentioning

confidence: 99%

Gains From Trade With Variable Trade Elasticities

Brooks

Pujolás

2019

Int Economic Review

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We measure gains from trade in multisector economies with nonhomothetic preferences where changes in trade costs generate reallocation of expenditure across sectors. We show how to measure the trade elasticity and how it relates to welfare. In this environment, the trade elasticity now varies both across countries and with levels of trade costs. In an application, we find that the trade elasticity varies substantially across countries and that the gains from moving from autarky to observed trade are on average between 24% and 28% greater than in a model where the trade elasticity is constant.

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“…Finally, a number of other recent studies have analyzed the macroeconomic effects of trade policy reforms and other shocks in dynamic, open-economy models with adjustment frictions on investment (Bajona and Kehoe 2010, Brooks and Pujolas 2018, Ravikumar et al 2019, Eaton et al 2011), employment (Dix-Carneiro 2014 and trade (Baldwin 1992;Krugman 1986;Engel and Wang 2011;Alessandria andChoi 2007, 2014;Ruhl 2008;Alessandria and Choi 2019;Alessandria et al 2018). My model features all three and is the first to integrate them into a multi-country, multi-sector setting with a realistic input-output production structure.…”

Section: Introductionmentioning

confidence: 99%

The macroeconomic impact of NAFTA termination

Steinberg

2020

Canadian J of Economics

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US President Trump has threatened to leave the North American Free Trade Agreement. How much would each member country gain or lose if this threat were carried out? Would trade imbalances within the region diminish? What would the transition to new production and consumption patterns look like? I provide quantitative answers to these questions using a dynamic general equilibrium model with a multi‐sector input–output production structure, heterogeneous firms that make forward‐looking export participation decisions, and adjustment frictions in trade and factor markets. Regional trade flows would fall dramatically, and while the US trade deficit with Canada would decline, the deficit with Mexico would grow. Welfare would fall by 0.04%, 0.12%, and 0.2% in the United States, Canada, and Mexico, respectively, and transition dynamics would significantly affect welfare in both the short run and the long run.

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Capital Accumulation and the Welfare Gains from Trade

Cited by 6 publications

References 24 publications

Quantitative Trade Models: Developments and Challenges

Quantitative Trade Models: Developments and Challenges

Gains From Trade With Variable Trade Elasticities

The macroeconomic impact of NAFTA termination

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