Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/123439
Authors: 
Mohler, Lukas
Year of Publication: 
2012
Series/Report no.: 
WWZ Discussion Paper 2012/16
Abstract: 
Findings from the literature suggest that previous estimates of the variety gains from trade are too small because of the imprecise measurement of the imported variety set under the Armington assumption. In this contribution, I use results from the literature on multi-product firms to obtain variety gain estimates that account for the entry and exit of firms as well as for product turnover within firms and find that welfare gains increase by a factor of 2.5 compared to the baseline Armington product-country variety differentiation case. I furthermore modify the lambda ratios presented in Feenstra (1994) by assuming that all import variations are due to extensive margin adjustments. Under this extreme assumption, variety gains increase by a factor of six but remain modest in magnitude.
Subjects: 
Margins of trade
welfare gains from trade
multi-product firm
JEL: 
F10
F12
F14
Document Type: 
Working Paper

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