Why Trade Matters After All

Ossa, Ralph

doi:10.3386/w18113

Cited by 100 publications

(185 citation statements)

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“…While extending the analysis to a multi-sector/multi-country model would be straightforward and would magnify the results consistent with the argument in Ossa (2015), using this simplistic version allows carrying through the main point in a clear and concise way. The parameters of the Two-piece, Log-normal and bounded…”

Section: Empirical Applicationmentioning

confidence: 85%

A tale of two tails: Productivity distribution and the gains from trade

Nigai

2017

Journal of International Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. A Tale of Two Tails: Productivity Distribution and the Gains from Trade Abstract I use firm-level data to show that neither the Log-normal nor the Pareto distribution can approximate the shape of the productivity distribution along the entire support. While the former underpredicts the thickness of the right tail, the latter does not capture the shape of the left one. Using empirical distribution as a benchmark, I show that such inaccuracies lead to sizable errors in the estimates of the gains from trade in models featuring firm selection. I propose using a mixed distribution which models the left tail as Log-normal and right tail as Pareto and produces negligible errors in quantitative analysis. JEL-Codes: F100, F120. Terms of use: Documents in EconStor may

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Section: Empirical Applicationmentioning

confidence: 85%

A tale of two tails: Productivity distribution and the gains from trade

Nigai

2017

Journal of International Economics

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“…We then …rst-di¤erence the generated data across the two periods in the same way we di¤erenced the actual data. 32 Secondly, we implement a di¤erence-in-di¤erences strategy similar to Tre ‡er (2004).…”

Section: Accepted Articlementioning

confidence: 99%

“…As discussed, …rst-di¤erencing the data reduces the magnitude of all moments with the exception of the variance of (…rst-di¤erenced) productivity growth rates. However, the …rst-di¤erenced theoretical moments are also smaller, so that we only 32 An alternative approach would be to directly compare the 1988-1996 model predictions to the …rst-di¤erenced data. This is not strictly correct, however, because there were small (GATT-driven) tari¤ reductions in the 1980-1988 period, too.…”

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confidence: 99%

“…We also contribute to this literature by performing a comparative evaluation of a wide range of popular trade models, rather than focusing on the performance of one particular version. Finally, we look at both withinand out-of-sample predictions and employ formal statistical tests to evaluate model performance, rather than only comparing the model predictions and data in a relatively ad hoc fashion.Secondly, we contribute to the rapidly growing literature on quantitative trade models (e.g., Eaton and Kortum, 2002;Alvarez and Lucas, 2007;Hsieh and Ossa, 2011;Levchenko and Zhang, 2011;Arkolakis et al, 2012;Ossa, 2012;and Costinot and Rodríguez-Clare, 2013, for a recent overview). One of the key purposes of these papers is to compute the gains from trade in di¤erent gravity-type models and to relate the magnitude of the predicted gains to speci…c model features.…”

mentioning

confidence: 99%

“…Secondly, we contribute to the rapidly growing literature on quantitative trade models (e.g., Eaton and Kortum, 2002;Alvarez and Lucas, 2007;Hsieh and Ossa, 2011;Levchenko and Zhang, 2011;Arkolakis et al, 2012;Ossa, 2012;and Costinot and Rodríguez-Clare, 2013, for a recent overview). One of the key purposes of these papers is to compute the gains from trade in di¤erent gravity-type models and to relate the magnitude of the predicted gains to speci…c model features.…”

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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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The causal effect of free trade agreements on the trade margins: Product‐level evidence from geographically distant partners

Cho

Choi

Díaz

2022

Southern Economic Journal

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We estimate the causal effects of free trade agreements (FTAs) on the trade margins by focusing on recent agreements involving geographically distant partners.Using border-sharing countries as controls, our productlevel difference-in-differences estimates reveal that FTAs had positive and significant effects, with the extensive margin accounting for around half of the export growth. In terms of timing, the intensive margin effects preceded those of the extensive margin. At the sectoral level, our results indicate that the extensive margin drove export growth in sectors with differentiated products, whereas export growth in sectors with homogeneous products was due to the intensive margin.

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Why Trade Matters After All

Cited by 100 publications

References 13 publications

A tale of two tails: Productivity distribution and the gains from trade

A tale of two tails: Productivity distribution and the gains from trade

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

The causal effect of free trade agreements on the trade margins: Product‐level evidence from geographically distant partners

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