A large agronomic literature models the implications of climate change for a variety of crops and locations around the world. The goal of the present paper is to quantify the macro-level consequences ...of these micro-level shocks. Using an extremely rich micro-level data set that contains information about the productivity—both before and after climate change—of each of 10 crops for each of 1.7 million fields covering the surface of the earth, we find that the impact of climate change on these agricultural markets would amount to a 0.26 percent reduction in global GDP when trade and production patterns are allowed to adjust. Since the value of output in our 10 crops is equal to 1.8 percent of world GDP, this corresponds to about one-sixth of total crop value.
We develop a methodology to construct nonparametric counterfactual predictions, free of functional form restrictions on preferences and technology, in neoclassical models of international trade. ...First, we establish the equivalence between such models and reduced exchange models in which countries directly exchange factor services. This equivalence implies that, for an arbitrary change in trade costs, counterfactual changes in the factor content of trade, factor prices, and welfare only depend on the shape of a reduced factor demand system. Second, we provide sufficient conditions under which estimates of this system can be recovered nonparametrically. Together, these results offer a strict generalization of the parametric approach used in socalled gravity models. Finally, we use China's recent integration into the world economy to illustrate the feasibility and potential benefits of our approach.
New Trade Models, Same Old Gains? Arkolakis, Costas; Costinot, Arnaud; Rodríguez-clare, Andrés
The American economic review,
02/2012, Letnik:
102, Številka:
1
Journal Article
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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."
This paper develops tools and techniques to analyze the determinants of factor allocation and factor prices in economies with a large number of goods and factors. The main results of our paper ...characterize sufficient conditions for robust monotone comparative statics predictions in a Roy-like assignment model. These general results are then used to generate new insights about the consequences of globalization.
The home-market effect, first hypothesized by Linder (1961) and later formalized by Krugman (1980), is the idea that countries with larger demand for some products at home tend to have larger sales ...of the same products abroad. In this article, we develop a simple test of the home-market effect using detailed drug sales data from the global pharmaceutical industry. The core of our empirical strategy is the observation that a country's exogenous demographic composition can be used as a predictor of the diseases that its inhabitants are most likely to die from and, in turn, the drugs they are most likely to demand. We find that the correlation between predicted home demand and sales abroad is positive and greater than the correlation between predicted home demand and purchases from abroad. In short, countries tend to be net sellers of the drugs they demand the most, as predicted by Linder (1961) and Krugman (1980).
The WTO and the EU have chosen two different agreements on product standards. While the WTO's approach is primarily based on a “National Treatment” (NT) principle, the EU's approach crucially relies ...on a principle of “Mutual Recognition” (MR). This paper offers a first look at the comparative performance of these two principles. We show that standards are imposed for levels of externalities that are too low under NT and too high under MR. This suggests that NT should be preferred to MR when the amount of trade in goods characterized by high levels of externalities is large.
We develop a theory of capital controls as dynamic terms-of-trade manipulation. We study an infinite-horizon endowment economy with two countries. One country chooses taxes on international capital ...flows in order to maximize the welfare of its representative agent, while the other country is passive. We show that a country growing faster than the rest of the world has incentives to promote domestic savings by taxing capital inflows or subsidizing capital outflows. Although our theory of capital controls emphasizes interest rate manipulation, the pattern of borrowing and lending, per se, is irrelevant.
COMPARATIVE ADVANTAGE AND OPTIMAL TRADE POLICY Costinot, Arnaud; Donaldson, Dave; Vogel, Jonathan ...
The Quarterly journal of economics,
05/2015, Letnik:
130, Številka:
2
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The theory of comparative advantage is at the core of neoclassical trade theory. Yet we know little about its implications for how nations should conduct their trade policy. For example, should ...import sectors with weaker comparative advantage be protected more? Conversely, should export sectors with stronger comparative advantage be subsidized less? In this article we take a first stab at exploring these issues. Our main results imply that in the context of a canonical Ricardian model, optimal import tariffs should be uniform, whereas optimal export subsidies should be weakly decreasing with respect to comparative advantage, reflecting the fact that countries have more room to manipulate prices in their comparative-advantage sectors. Quantitative exercises suggest substantial gains from such policies relative to simpler tax schedules.
This paper offers the first empirical analysis of the impact of adaptation on the boundary of multinational firms. To do so, we develop a ranking of sectors in terms of "routineness" by merging two ...sets of data: ratings of occupations by their intensities in solving problems from the U.S. Department of Labor's Occupational Information Network and U.S. employment shares of occupations by sectors from the Bureau of Labor Statistics Occupational Employment Statistics. Using U.S. Census trade data, we demonstrate that the share of intrafirm trade tends to be higher in less routine sectors.
This paper proposes a simple theory of international trade with endogenous productivity differences across countries. The core of our analysis lies in the determinants of the division of labor. We ...consider a world economy comprising two large countries, with a continuum of goods and one factor of production, labor. Each good is characterized by its complexity, defined as the number of tasks that must be performed to produce one unit. There are increasing returns to scale in the performance of each task, which creates gains from specialization, and uncertainty in the enforcement of each contract, which create transaction costs. The trade-off between these two forces pins down the size of productive teams across sectors in each country. Under free trade, the country where teams are larger specializes in the more complex goods. In our model, it is the country where the product of institutional quality and human per worker capital is larger. Hence, better institutions and more educated workers are complementary sources of comparative advantage in the more complex industries.
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