Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97424
Authors: 
Edmond, Chris
Midrigan, Virgiliu
Xu, Daniel Yi
Year of Publication: 
2013
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 299
Abstract: 
We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large inefficiencies associated with markups, and (ii) a weak pattern of cross-country comparative advantage in individual sectors. We find strong evidence for both of these ingredients using producer-level data for Taiwanese manufacturing establishments. Parameterizations of the model consistent with this data thus predict large pro-competitive gains from trade, much larger than those in standard Ricardian models. In stark contrast to standard Ricardian models, data on changes in trade volume are not sufficient for determining the gains from trade.
Subjects: 
Productivity
misallocation
comparative advantage
intra-industry trade
JEL: 
F1
O4
Document Type: 
Working Paper

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