Recent trade theory in the Krugman (1980) tradition predicts that countries with larger market size enjoy higher levels of total factor productivity (TFP) - and equivalently of real per capita income or welfare - as a smaller fraction of spending on inputs is affected by trade costs. However, in...

Trade economists traditionally study the effect of lower variable trade costs. While increasingly important politically, technical barriers to trade (TBTs) have received less attention. Viewing TBTs as fixed regulatory costs related to the entry into export markets, we use a model with...

Trade economists traditionally study the effect of lower variable trade costs. While increasingly important politically, technical barriers to trade (TBTs) have received less attention. Viewing TBTs as fixed regulatory costs related to the entry into export markets, we use a model with...

In the two-country Melitz (2003) model, unilateral trade liberalization is often cast as a reduction of iceberg transportation costs and wages are determined by a linear outside sector. We show that welfare results reverse when wages adjust and trade frictions are revenue-generating tariffs. --...

Increasing-returns-to-scale imperfect competition trade models predict a more than proportionate relationship between the larger country's share in world endowments and its share in producing firms: the so called home market effect (HME). While this result plays a key role in empirical testing,...

Arkolakis, Costinot and Rodriguez-Clare (ACR, 2012) prove that, conditional on the change in openness, the welfare gains from foreign trade reforms are quantitatively identical across single-sector trade models with radically different micro-foundations. We generalize this result to domestic and...

We derive a simple equation for the welfare gains from trade when tariffs are liberalized or iceberg trade costs fall. Covering various one-sector trade models that may or may not feature extensive margins and imperfect competition, we generalize the analysis of Arkolakis, Costinot and...