Global Rebalancing with Gravity: Measuring the Burden of Adjustment

Dekle, Robert; Eaton, Jonathan; Kortum, Samuel

doi:10.1057/imfsp.2008.17

Cited by 342 publications

(328 citation statements)

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“…i . Second, equation (12) shows that in the presence of high trade costs, the main determinant of the cost parameter ! it is the level of domestic manufacturing technology T !…”

Section: Estimation and Resultsmentioning

confidence: 99%

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Comparative Advantage in Innovation and Production

Somale

2017

Int. finance discuss. pap.

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This paper develops a multi-country, general equilibrium, semi endogenous growth model of innovation and trade in which specialization in innovation and production are jointly determined. The distinctive element of the model is the ability of the agents to direct their research e¤orts to speci…c goods, in a context of heterogeneous innovation capabilities across countries and contemporaneous decreasing returns to R&D. The model features a two-way relationship between trade and technology absent in standard quantitative Ricardian trade models. I calibrate the model using a sample of 29 countries and 18 manufacturing industries and quantify the importance of endogenous adjustments in technology. I …nd that endogenous adjustments in technology due to directed research can account for up to 52.8% of the observed variance in comparative advantage in production. In addition, the model suggests that standard Ricardian models overestimate the reductions in real income from increases in trade costs and underestimate the increment in real income due to trade liberalizations.

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“…i . Second, equation (12) shows that in the presence of high trade costs, the main determinant of the cost parameter ! it is the level of domestic manufacturing technology T !…”

Section: Estimation and Resultsmentioning

confidence: 99%

“…This assumption implies that each country must …nance all R&D that takes place within its borders from domestic savings, and that trade is balanced every period. 12 However, consumers of country i can freely borrow and lend at the risk free domestic interest rate r it .…”

Section: R;! Tmentioning

confidence: 99%

Comparative Advantage in Innovation and Production

Somale

2017

Int. finance discuss. pap.

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“…We write the model's equilibrium conditions in changes following Dekle et al (2008). This allows us to express predicted increases in trade ‡ows and measured productivity as functions of initial trade shares, the actual observed tari¤ cuts as well as a small number of additional parameters.…”

Section: Accepted Articlementioning

confidence: 99%

“…16 Both growth rates require a suitable PPI de ‡ator. In Appendix A, we provide a more detailed description of how Statistics Canada calculated PPIs at the sectorial level during our sample period, and how their procedure can be replicated in our model.…”

Section: Accepted Articlementioning

confidence: 99%

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Tariffs, Trade and Productivity: A Quantitative Evaluation of Heterogeneous Firm Models

Breinlich

Cuñat

2015

Econ J

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We examine the quantitative predictions of heterogeneous …rm in the context of the Canada -US Free Trade Agreement (CUSFTA) of 1989. We compute predicted increases in trade ‡ows and measured productivity and compare them to the post-CUSFTA increases observed in the data. Most models predict increases in measured productivity that are too low by an order of magnitude relative to predicted increases in trade ‡ows. A multi-product …rm extension that allows for within-…rm productivity increases has the potential to reconcile model predictions with the data.Since the seminal contribution by Melitz (2003), heterogeneous …rm models have become a widely used instrument in the 'toolkit'of international economists. These models This work builds upon our earlier (unpublished) paper "Trade Liberalization and Heterogeneous Firm Models: An Evaluation Using the Canada -US Free Trade Agreement". We are grateful to Andy Bernard, Gordon Hanson, Miklós Koren, Sam Kortum, Marc Melitz, Alex Michaelides and Ralph Ossa for helpful discussions. We would also like to thank seminar participants at Banco de España, CEU, Chicago, CORE, the EEA Málaga Meeting, EUI, Fundación Rafael del Pino, Koç University, LSE, Munich, NBER Summer Institute, GIST and Vienna for comments and suggestions. All errors remain ours. Cuñat gratefully acknowledges …nancial support by the Austrian Science Fund (FWF #AP23424-G11). Corresponding author: Holger Breinlich, University of Essex, Department of Economics, Wivenhoe Park, Colchester CO4 3SQ, United Kingdom; Email address: hbrein@essex.ac.uk.This article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the Version of Record. Please cite this article as doi: 10.1111/ecoj.12218This article is protected by copyright. All rights reserved. Accepted Articlewere motivated by a number of stylized facts: (i) the existence of large productivity differences among …rms within the same industry; (ii) the higher productivity of exporting …rms as compared to non-exporting …rms; (iii) the large levels of resource reallocations across …rms within industries following trade liberalization reforms; and (iv) the resulting gains in aggregate industry productivity. In a generalization of the Krugman (1979Krugman ( , 1980 model, the introduction of within-industry productivity heterogeneity and beachhead costs enables this class of models to produce equilibria and comparative statics along the lines of these facts.While these models are thus qualitatively consistent with available empirical evidence, a thorough evaluation of their quantitative predictions with regards to trade liberalization is still at an early stage. This is despite the fact that the models'quantitative predictions for the link between trade liberalization and changes in aggregate productivity or trade ‡ows are of …rst-order importance for economic policy and welfare analysis. In this paper, we ...

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Global gains from reduction in trade costs

Lai

2019

Econ Theory

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We derive a simple equation to calculate the global welfare impact of the simultaneous reduction of trade costs between multiple country-pairs. Interestingly, we …nd that we obtain the same equation for a broad class of trade models. Moreover, balanced trade is mostly not required for the equation to work, nor does trade elasticity need to be known. The global welfare impact only depends on two sets of statistics: (i) the ratio of bilateral trade ‡ow between each pair of trading partners and global income; and (ii) the percentage change in exporting cost for each pair of trading partners. The class of models includes the many-country, many-good neo-classical-type model, and the Armington-type models such as Eaton and Kortum (2002), Krugman (1980), Melitz (2003) with Pareto distribution of …rm productivity, and the extensions of these models to the multi-country and multi-sector case, multi-factor production technology, multi-stage production, the existence of intermediate good and the existence of a non-traded good sector in each country. We then apply the equation to estimate the global welfare impact of the worldwide reduction of international shipping costs in the last …ve decades.

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Global Rebalancing with Gravity: Measuring the Burden of Adjustment

Cited by 342 publications

References 7 publications

Comparative Advantage in Innovation and Production

Comparative Advantage in Innovation and Production

Tariffs, Trade and Productivity: A Quantitative Evaluation of Heterogeneous Firm Models

Global gains from reduction in trade costs

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