Search Results
Discussion Paper
Improving the Analysis of Trade Policy
The standard model that economists use to analyze the impact of trade reforms systematically underpredicts changes in trade patterns. It not only underestimates overall trade magnitudes, but also fails to predict which industries experience the largest trade increases. This failure results from not accounting for rapid growth in post-liberalization trade of the products that these industries produce. {{p}} This paper documents these weaknesses and demonstrates an alternative methodology. {{p}} Our modified model performs better because it accounts for the rapid growth of trade in products ...
Report
Quantitative Trade Models: Developments and Challenges
Applied general equilibrium (AGE) models, which feature multiple countries or regions, multiple sectors, and input-output linkages across sectors in a Walrasian general equilibrium framework, have been the dominant tool for evaluating the impact of trade liberalization since the 1980s. We provide an overview of the historical development of AGE models and a guide as to how they are used to perform policy analysis. We then review and document shortcomings in the performance of AGE models in predicting the sectoral effects of past trade reforms, that is, we show that AGE models often perform ...
Report
The Opportunity Costs of Entrepreneurs in International Trade
We show that a trade model with an exogenous set of heterogeneous firms with fixed operating costs has the same aggregate outcomes as a span-of-control model. Fixed costs in the heterogeneous-firm model are entrepreneurs' forgone wage in the span-of-control model.