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Now showing items 1 - 10 of 10

  • The Elusive Pro-Competitive Effects of Trade

    Arkolakis, Costas   Costinot, Arnaud   Donaldson, Dave   Rodriguez-Clare, Andrs  

    We study the gains from trade liberalization in models with monopolistic competition, firm-level heterogeneity, and variable markups. For a large class of demand functions used in the international macro and trade literature, we derive a parsimonious generalization of the welfare formula in Arkolakis et al. (2012). We then use both estimates from micro-level trade data and evidence regarding firm-level pass-through to quantify the implications of this new formula. Within the class of models that we consider, our main finding is that gains from trade liberalization predicted by models with variable markups are equal to, at best, and slightly lower than, at worst, those predicted by models with constant markups. In this sense, pro-competitive effects of trade are elusive.
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  • Firm learning and growth

    Arkolakis, Costas   Papageorgiou, Theodore   Timoshenko, Olga A.  

    We study the implications of introducing learning (Jovanovic, 1982) in a standard monopolistically competitive environment with firm productivity heterogeneity. Our setup predicts that firm growth rates decrease with age, holding size constant, and decrease with size, holding age constant, a fact that models focusing on idiosyncratic productivity shocks have difficulty matching. We characterize the planner's problem and show that relative quantities between any two firms are the same in both planner's allocation and the decentralized economy. As a result, any inefficiency is driven by a discrepancy in the firm entry and exit thresholds. We calibrate the model using Colombian plant-level data and demonstrate how policies directly affecting firm entry and exit can be welfare enhancing. In particular, age-dependent subsidies allow young firms to avoid early exit and thus benefit consumers through access to a larger number of varieties. (C) 2017 Elsevier Inc. All rights reserved.
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  • Innovation and Production in the Global Economy

    Arkolakis, Costas   Ramondo, Natalia   Rodriguez-Clare, Andres   Yeaple, Stephen  

    We develop a quantifiable general equilibrium model of trade and multinational production (MP) in which countries can specialize in innovation or production. Home market effects or comparative advantage leads some countries to specialize in innovation and relegate manufacturing operations to other countries via outward MP. Counterfactual analysis reveals that the reduction in the cost of MP or the integration of China into the world economy may hurt countries that are driven to specialize in production, although these losses tend to be very small. Contrary to popular fears, production workers gain even in countries that further specialize in innovation.
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  • The Elusive Pro-Competitive Effects of Trade

    Arkolakis, Costas   Costinot, Arnaud   Donaldson, Dave   Rodríguez-Clare, Andrés  

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  • Firm Learning and Growth

    Arkolakis, Costas   Papageorgiou, Theodore   Timoshenko, Olga A.  

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  • A Unified Theory of Firm Selection and Growth

    Arkolakis, Costas  

    This article develops an analytical framework to study firm and exporter growth and provides a dynamic foundation for a standard general equilibrium trade model. Firm-level growth is the result of idiosyncratic productivity improvements with a continuous arrival of new potential producers. A firm enters a market if it is profitable to incur the marginal cost to reach the first consumer and pays an increasing marketing cost to reach additional consumers. I calibrate the model using data on the cross section of firm sales and bilateral trade, as well as the rate of incumbent firm exit. The calibrated model predicts that a firm's growth is inversely related to its initial size, and that the distribution of growth rates of small firms is heavily skewed to the right. These predictions are confirmed by looking at the growth of sales of U.S. firms and Brazilian exporters to the United States. I use this model to study the impact of cross-firm reallocations on economic activity and measured productivity.
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  • TRADE AND THE TOPOGRAPHY OF THE SPATIAL ECONOMY

    Allen, Treb   Arkolakis, Costas  

    We develop a general equilibrium framework to determine the spatial distribution of economic activity on any surface with (nearly) any geography. Combining the gravity structure of trade with labor mobility, we provide conditions for the existence, uniqueness, and stability of a spatial economic equilibrium and derive a simple set of equations that govern the relationship between economic activity and the geography of the surface. We then use the framework to estimate the topography of trade costs, productivities and amenities in the United States. We find that geographic location accounts for at least twenty percent of the spatial variation in U. S. income. Finally, we calculate that the construction of the interstate highway system increased welfare by 1.1 to 1.4 percent, which is substantially larger than its cost.
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  • Exporters and Their Products: A Collection of Empirical Regularities

    Arkolakis, Costas   Muendler, Marc-Andreas  

    We present a set of empirical regularities that characterize the export activity of firms. We decompose firm-level exports by product category across destination markets in a consistent manner for four data sets from Brazil, Chile, Denmark, and Norway. We relate the empirical regularities to new trade theories that connect microeconomic activity to aggregate outcomes. Our findings corroborate main motivating facts and may help discipline future theoretical work. (JEL codes: F12, L11, F14).
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  • New Trade Models, Same Old Gains?

    Arkolakis, Costas   Costinot, Arnaud   Rodríguez-Clare, Andrés  

    Micro-level data have had a profound influence on research in international trade over the last ten years. In many regards, this research agenda has been very successful. New stylized facts have been uncovered and new trade models have been developed to explain these facts. In this paper we investigate to what extent answers to new micro-level questions have affected answers to an old and central question in the field: how large are the welfare gains from trade? A crude summary of our results is: "So far, not much."
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  • Endogenous Variety and the Gains from Trade

    Arkolakis, Costas   Demidova, Svetlana   Klenow, Peter J   Rodréguez-Clare, Andrés  

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