Heterogeneous Agent Trade
Abstract: This paper studies the implications of household heterogeneity for trade. I develop a model where household heterogeneity is induced via incomplete markets and results in heterogeneous price elasticities. Conditional on exposure to trade, heterogeneous price elasticities imply that different households value price changes differently, and thus rich and poor households experience different gains from trade. I calibrate the model to match bilateral trade flows and micro-facts about household-level expenditure patterns and elasticities. I find gains from trade that are pro-poor and that the average gains from trade are substantially larger than representative agent benchmarks.
File(s): File format is application/pdf https://www.minneapolisfed.org/research/sr/sr653.pdf
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Staff Report
Publication Date: 2023-10-18