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Robert C. Feenstra - One of the best experts on this subject based on the ideXlab platform.
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Gains from Trade Under Monopolistic Competition
Pacific Economic Review, 2016Co-Authors: Robert C. FeenstraAbstract:The monopolistic competition model in international Trade predicts three sources of Gains from Trade that are not present in traditional models: consumer Gains from having access to new import varieties of differentiated products; Gains from a reduction in firm markups due to import competition; and Gains from the self-selection of more efficient firms into export markets, provided that firms are heterogeneous in their productivities. With the added assumption that the distribution of firms’ productivity is Pareto, and with a support that is unbounded above, we argue that only the third source of Gains from Trade, due to the self-selection of firms, operates. This result helps to explain the simple formula for the Gains from Trade found by Arkolakis et al. (2012). If the Pareto distribution is bounded above, however, then all three sources of Gains from Trade operate once again.
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restoring the product variety and pro competitive Gains from Trade with heterogeneous firms and bounded productivity
Research Papers in Economics, 2014Co-Authors: Robert C. FeenstraAbstract:The monopolistic competition model in international Trade offers three sources of Gains from Trade that do not arise in competitive models: expansion in product variety; a pro-competitive reduction in the markups charged by firms; and the self-selection of more efficient firms into exporting. Recent literature on Trade with heterogeneous firms has emphasized the third of these effects, and the first two effects are ruled out when using a Pareto distribution for productivity with a support that is unbounded above. The goal of this paper is to restore a role for product variety and pro-competitive Gains from Trade by using a bounded Pareto distribution for productivity.
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measuring the Gains from Trade under monopolistic competition
National Bureau of Economic Research, 2009Co-Authors: Robert C. FeenstraAbstract:Three sources of Gains from Trade under monopolistic competition are: (i) new import varieties available to consumers; (ii) enhanced efficiency as more productive firms begin exporting and less productive firms exit; (iii) reduced markups charged by firms due to import competition. The first source of Gains can be measured as new goods in a CES utility function for consumers. We argue that the second source is formally analogous to the producer gain from new goods, with a constant-elasticity transformation curve for the economy. We suggest that the third source of gain can be measured using a translog expenditure function for consumers, which in contrast to the CES case, allows for finite reservation prices for new goods and endogenous markups.
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New Evidence on the Gains from Trade
Review of World Economics, 2006Co-Authors: Robert C. FeenstraAbstract:We summarize the evidence on the Gains from Trade in monopolistic competition models, arising from three sources: (i) price reductions due to increasing returns to scale; (ii) increased product variety available to consumers; (iii) self-selection of firms with only the most efficient firms surviving after Trade liberalization. There is little direct evidence to support the first source of Gains from Trade, though some indirect evidence from the European Union. The second and third sources of Gains from Trade find strong empirical support from studies from various countries, relying on new models and new empirical methods.
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Trade adjustment assistance and Pareto Gains from Trade
Journal of International Economics, 1994Co-Authors: Robert C. Feenstra, Tracy R. LewisAbstract:Abstract In a model where all factors of production are imperfectly mobile, we argue that the Dixit-Norman scheme of commodity taxes may not lead to strict Pareto Gains from Trade. Rather, this scheme must be augmented by policies that give factors an incentive to move between industries: hence, the role for Trade adjustment assistance. By offering an adjustment subsidy to all individuals wiling to move, and also using the Dixit-Norman pattern of commodity taxes, the government can implement Pareto Gains from Trade under the condition we identify.
Ina Simonovska - One of the best experts on this subject based on the ideXlab platform.
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Trade models Trade elasticities and the Gains from Trade
Social Science Research Network, 2014Co-Authors: Ina Simonovska, Michael E. WaughAbstract:We argue that the welfare Gains from Trade in new models with micro-level margins exceed those in frameworks without these margins. Theoretically, we show that for fixed Trade elasticity, different models predict identical Trade flows, but different patterns of micro-level price variation. Thus, given data on Trade flows and micro-level prices, different models have different implied Trade elasticities and welfare Gains. Empirically, models with extensive or variable mark-up margins yield significantly larger welfare Gains. The results are robust to incorporating into the estimation moment conditions that use Trade-flow and tariff data, which imply a common Trade elasticity across models.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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Trade Models, Trade Elasticities, and the Gains from Trade
2014Co-Authors: Ina Simonovska, Michael E. WaughAbstract:We argue that the welfare Gains from Trade in new models with micro-level margins exceed those in frameworks without these margins. Theoretically, we show that for fixed Trade elasticity, different models predict identical Trade flows, but different patterns of micro-level price variation. Thus, given data on Trade flows and micro-level prices, different models have different implied Trade elasticities and welfare Gains. Empirically, models with extensive or variable mark-up margins yield significantly larger welfare Gains. The results are robust to incorporating into the estimation moment conditions that use Trade-flow and tariff data, which imply a common Trade elasticity across models.
Michael E. Waugh - One of the best experts on this subject based on the ideXlab platform.
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redistributing the Gains from Trade through progressive taxation
Research Papers in Economics, 2018Co-Authors: Spencer Lyon, Michael E. WaughAbstract:Should a nation's tax system become more progressive as it opens to Trade? Does opening to Trade change the benefits of a progressive tax system? We answer these question within a standard incomplete markets model with frictional labor markets and Ricardian Trade. Consistent with empirical evidence, adverse shocks to comparative advantage lead to labor income losses for import-competition-exposed workers; with incomplete markets, these workers are imperfectly insured and experience welfare losses. A progressive tax system is valuable, as it substitutes for imperfect insurance and redistributes the Gains from Trade. However, it also reduces the incentives for labor to reallocate away from comparatively disadvantaged locations. We find that optimal progressivity should increase with openness to Trade with a ten percentage point increase in openness necessitating a five percentage point increase in marginal tax rates for those at the top of the income distribution.
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Trade models Trade elasticities and the Gains from Trade
Social Science Research Network, 2014Co-Authors: Ina Simonovska, Michael E. WaughAbstract:We argue that the welfare Gains from Trade in new models with micro-level margins exceed those in frameworks without these margins. Theoretically, we show that for fixed Trade elasticity, different models predict identical Trade flows, but different patterns of micro-level price variation. Thus, given data on Trade flows and micro-level prices, different models have different implied Trade elasticities and welfare Gains. Empirically, models with extensive or variable mark-up margins yield significantly larger welfare Gains. The results are robust to incorporating into the estimation moment conditions that use Trade-flow and tariff data, which imply a common Trade elasticity across models.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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Trade Models, Trade Elasticities, and the Gains from Trade
2014Co-Authors: Ina Simonovska, Michael E. WaughAbstract:We argue that the welfare Gains from Trade in new models with micro-level margins exceed those in frameworks without these margins. Theoretically, we show that for fixed Trade elasticity, different models predict identical Trade flows, but different patterns of micro-level price variation. Thus, given data on Trade flows and micro-level prices, different models have different implied Trade elasticities and welfare Gains. Empirically, models with extensive or variable mark-up margins yield significantly larger welfare Gains. The results are robust to incorporating into the estimation moment conditions that use Trade-flow and tariff data, which imply a common Trade elasticity across models.
Joshua Slive - One of the best experts on this subject based on the ideXlab platform.
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estimating the Gains from Trade in limit order markets
Journal of Finance, 2006Co-Authors: Burton Hollifield, Robert A. Miller, Patrik Sandås, Joshua SliveAbstract:We present a method to estimate the Gains from Trade in limit-order markets and provide empirical evidence that the limit-order market is a good market design. Using observations on order submissions and execution and cancellation histories, we estimate both the distribution of Traders’ unobserved valuations for the stock and latent Trader arrival rates. We use the resulting estimates to compute the current Gains from Trade, the Gains from Trade in a perfectly liquid market, and the Gains from Trade with a monopoly liquidity supplier. The current Gains are 90% of the maximum Gains and 150% of the monopolist Gains. THE MAJORITY OF THE WORLD’S STOCK EXCHANGES operate some form of a limit-order market. A feature of good market design is that Traders realize most of the potential Gains from Trade. We develop a method for identifying and estimating the Gains from Trade in a limit-order market and apply our method to a sample from a particular limit-order market, the Vancouver Stock Exchange (VSE). We find that Gains from Trade in the VSE are approximately 90% of the Gains from Trade in a perfectly liquid market and approximately 50% more than Gains from Trade in a market in which liquidity is supplied by a profit-maximizing monopolist. Our results therefore provide new empirical evidence that the limitorder market is a good market design. A large number of experimental studies document that the Gains from Trade in a double auction are close to the maximum Gains from Trade. See, for example, Cason and Friedman (1996) or the survey by Holt (1995). Similarly, our empirical results show that the limit-order market—a market design similar to
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Estimating the Gains from Trade in Limit‐Order Markets
The Journal of Finance, 2006Co-Authors: Burton Hollifield, Robert A. Miller, Patrik Sandås, Joshua SliveAbstract:We present a method to estimate the Gains from Trade in limit-order markets and provide empirical evidence that the limit-order market is a good market design. Using observations on order submissions and execution and cancellation histories, we estimate both the distribution of Traders’ unobserved valuations for the stock and latent Trader arrival rates. We use the resulting estimates to compute the current Gains from Trade, the Gains from Trade in a perfectly liquid market, and the Gains from Trade with a monopoly liquidity supplier. The current Gains are 90% of the maximum Gains and 150% of the monopolist Gains. THE MAJORITY OF THE WORLD’S STOCK EXCHANGES operate some form of a limit-order market. A feature of good market design is that Traders realize most of the potential Gains from Trade. We develop a method for identifying and estimating the Gains from Trade in a limit-order market and apply our method to a sample from a particular limit-order market, the Vancouver Stock Exchange (VSE). We find that Gains from Trade in the VSE are approximately 90% of the Gains from Trade in a perfectly liquid market and approximately 50% more than Gains from Trade in a market in which liquidity is supplied by a profit-maximizing monopolist. Our results therefore provide new empirical evidence that the limitorder market is a good market design. A large number of experimental studies document that the Gains from Trade in a double auction are close to the maximum Gains from Trade. See, for example, Cason and Friedman (1996) or the survey by Holt (1995). Similarly, our empirical results show that the limit-order market—a market design similar to
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Estimating the Gains from Trade in Limit Order Markets
SSRN Electronic Journal, 2004Co-Authors: Burton Hollifield, Robert A. Miller, Patrik Sandås, Joshua SliveAbstract:We present a method for identifying and estimating the Gains from Trade in limit order markets and provide new empirical evidence that the limit order market is a good market design. The Gains from Trade in our model arise because Traders have different valuations for the stock. We use observations from the Traders' order submissions and the execution and cancellation histories of the Traders' order submissions to estimate the distribution of Traders' unobserved valuations for the stock. We use the parameter estimates for our model to compute the current Gains from Trade in the limit order market and the Gains from Trade that the Traders would attain in a perfectly liquid market.
Pablo D. Fajgelbaum - One of the best experts on this subject based on the ideXlab platform.
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Measuring the Unequal Gains from Trade
The Quarterly Journal of Economics, 2016Co-Authors: Pablo D. Fajgelbaum, Amit K. KhandelwalAbstract:Individuals that consume dierent baskets of goods are dierentially aected by relative price changes caused by international Trade. We develop a methodology to measure the unequal Gains from Trade across consumers within countries that is applicable across countries and time. The approach uses data on aggregate expenditures across goods with dierent income elasticities and parameters estimated from a non-homothetic gravity equation. We nd considerable variation in the pro-poor bias of Trade depending on the income elasticity of each country’s exports. Nonhomotheticities across sectors imply that the Gains from Trade typically favor the poor, who concentrate spending in more Traded sectors.
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measuring the unequal Gains from Trade
Social Science Research Network, 2014Co-Authors: Pablo D. Fajgelbaum, Amit KhandelwalAbstract:Individuals that consume different baskets of goods are differentially affected by relative price changes caused by international Trade. We develop a methodology to measure the unequal Gains from Trade across consumers within countries. The approach requires data on aggregate expenditures and parameters estimated from a non-homothetic gravity equation. We find that Trade typically favors the poor, who concentrate spending in more Traded sectors.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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Measuring the Unequal Gains from Trade
2013Co-Authors: Amit K. Khandelwal, Pablo D. FajgelbaumAbstract:How are the Gains distributed across individuals? What is the relative importance of income and consumption effects? First, we use survey data from a small open economy during 20 years to measure how international price variation impacted on the distribution of welfare through income and consumption effects. Then, we propose a new methodology for measuring the distribution of the Gains from Trade using aggregate Trade data. In the theory, we embed the Almost Ideal Demand System into otherwise standard models of Trade. We show that, given arbitrary shocks to income and prices, welfare changes at the individual level can be decomposed into: i) a common a term that captures aggregate Gains from Trade in the absence of inequality; ii) an individual taste effect that depends on relative price changes and non-homotheticity in preferences; and iii) an individual expenditure effect that captures shocks to total expenditures. We characterize conditions under which the common and the individual taste and expenditure effects can be recovered from aggregate expenditure data and prices, and we contrast the predictions of this approach with the micro approach based on survey data.
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Measuring the Unequal Gains from Trade
National Bureau of Economic Research, 2013Co-Authors: Pablo D. Fajgelbaum, Amit K. KhandelwalAbstract:Individuals that consume different baskets of goods are differentially affected by relative price changes caused by international Trade. We develop a methodology to measure the unequal Gains from Trade across consumers within countries. The approach requires data on aggregate expenditures and parameters estimated from a non-homothetic gravity equation. We find that Trade typically favors the poor, who concentrate spending in more Traded sectors.
