There is a common perception that low productivity or low growth is due to what can be called an "innovation shortfall," usually identified as a low rate of investment in research and development (R&D) when compared with some high innovation countries. The usual reaction to this perceived...

Recently, Gene Grossman and Esteban Rossi-Hansberg (GRH; "External Economies and International Trade: Redux," Quarterly Journal of Economics 125 [2010], 829--858) proposed a novel way to think about the implications of international trade in the presence of national external economies at the...

In this chapter we explore the popular but controversial idea that developing countries benefit from abandoning policy neutrality vis-a-vis trade, FDI and resource allocation across industries. Are developing countries justified in imposing tariffs, subsidies, and tax breaks that imply...

In this paper we present a version of the Melitz (2003) model for the case of a small economy and summarize its key relationships with the aid of a simple figure. We then use this figure to provide an intuitive analysis of the implications of asymmetric changes in trade barriers and show that a...

This paper quantifies the gains from openness arising from trade and multinational production (MP). We present a model that captures key dimensions of the interaction between these two flows: trade and MP are competing ways to serve a foreign market, MP relies on imports of intermediate goods...

We explore the effect of trade policy on productivity and welfare in the now standard model of firm-level heterogeneity and product differentiation with monopolistic competition. To obtain sharp results, we restrict attention to an economy that takes as given the price of imports and the demand...

We present a model where trade agreements are motivated by the desire of governments to commit vis-à-vis domestic lobbies, in addition to standard terms-of-trade externalities. The model predicts that trade liberalization is deeper when capital is more mobile across sectors, and when...

This paper discusses coordination failures, their relevance to developing countries, and the circumstances under which they occur, arguing that that clusters can be seen as agglomerations of firms and organizations in related economic activities among which coordination failures are likely to...