We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate...

The core-periphery model by Krugman (1991) has two 'dramatic' implications: catastrophic agglomeration and locational hysteresis. We study this seminal model with CES instead of Cobb-Douglas upper tier preferences. This small generalization suffices to change these stark implications. For a wide...

Models of the new economic geography share a number of common conclusions, but also exhibit notable differences, in particular with respect to the shape of the location pattern and the efficiency of the market equilibrium. This reflects the fact that these models rely heavily on specific...

The core-periphery model by Krugman (1991) has two 'dramatic' implications: catastrophic agglomeration and locational hysteresis. We study this seminal model with CES instead of Cobb-Douglas upper tier preferences. This small generalization suffices to change these stark implications. For a wide...

Models of the new economic geography share a number of common conclusions, but also exhibit notable differences, in particular with respect to the shape of the location pattern and the efficiency of the market equilibrium. This reflects the fact that these models rely heavily on specific...

The COVID-19 pandemic has disrupted trade and global value chains. Small open economies such as Portugal are particularly vulnerable. In this paper we consider the impact of the pandemic on the country's exports, arguing that an export-led recovery is possible. The challenge is to identify...

The home market effect (HME) is a distinguishing feature of the ?new? theory of international trade, but it is uncertain whether this effect survives if one moves beyond the simplifying setup with only two countries. We present a three -country version of the seminal model by Krugman (1980) and...

This paper uses the quantitative spatial model with heterogeneous locations linked by costly goods trade, migration and commuting developed in Monte et al. (2018) to address the workings of local labor markets in Germany. One key contribution concerns the analysis of the role of the expenditure...

The home market effect (HME) is a distinguishing feature of the “new” theory of international trade, but it is uncertain whether this effect survives if one moves beyond the simplifying setup with only two countries. We present a three -country version of the seminal model by Krugman (1980)...

This paper examines how firms in an emerging economy are affected by violence due to drug trafficking. Employing rich longitudinal plant-level data covering all of Mexico from 2005–2010, and using an instrumental variable strategy that exploits plausibly exogenous spatiotemporal variation in...