Goods trade, factor mobility and welfare

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Abstract

We develop a quantitative spatial model that incorporates a rich geography of trade costs and labor mobility with heterogeneous worker preferences across locations. We provide comparative statics for the unique equilibrium with respect to the primitives of the model. We show how the model can be used to undertake counterfactuals using only data in an initial equilibrium. In these counterfactuals, the welfare gains from trade depend on changes in both domestic trade shares and reallocations of population across locations. We show that factor mobility introduces quantitatively relevant differences in the counterfactual predictions of constant and increasing returns to scale models.

Original languageEnglish (US)
Pages (from-to)148-167
Number of pages20
JournalJournal of International Economics
Volume101
DOIs
StatePublished - Jul 1 2016

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Factor mobility
  • International trade
  • Welfare gains from trade

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