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...

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...

Estimates of labor mobility costs are needed to assess the responses of employment and wages to trade shocks when factor adjustment is costly. Available methods to estimate those costs rely on panel data, which are seldom available in developing countries. We propose a method to estimate...