Because of scale effects, idea-based growth models have the counterfactual implication that larger countries should be much richer than smaller ones. New trade models share this same problematic feature: although small countries gain more from trade than large ones, this is not strong enough to...

One feature of globalization is that countries are increasingly specialized in either innovation or in production. To understand the forces behind this specialization and its welfare consequences, we develop a monopolistic competition model of trade and multinational production (MP) in which...

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...