This paper studies the social desirability of agglomeration and the efficiency arguments for policy intervention in a simple, analytically solvable 'new economic geography' model with two trade integrating regions. The location pattern emerging as market equilibrium is bubbleshapedʺ, i.e. it...

The paper compares non-cooperative commodity taxation under the destination and origin principles under a variety of different assumptions about market structure. We consider a model of international duopoly with either quantity or price competition of firms and either segmented or integrated...

This paper explores the role of country asymmetries for trade and industrial policies with heterogeneous firms. Our analysis delivers a number of novel results. First, trade policies, infrastructure policies and industrial policies which improve the business conditions in one country have...

The robust empirical finding that exporting firms are systematically different from firms that merely serve domestic consumers has inspired the development of a new brand of trade theory, the theory of heterogeneous firms and trade. The establishment of a canonical model due to Melitz (2003) has...

This paper develops a simple general equilibrium model which establishes a link between the patience of economic agents and the well-being of nations. We show that firms in long-term oriented countries can mitigate hold-up inefficiencies by engaging with their suppliers in relational contracting...