GAINS FROM TRADE WITH VARIABLE TRADE ELASTICITIES

Wyatt J. Brooks, Pau S. Pujolas

Research output: Contribution to journalArticlepeer-review

Abstract

We measure gains from trade in multisector economies with nonhomothetic preferences where changes in trade costs generate reallocation of expenditure across sectors. We show how to measure the trade elasticity and how it relates to welfare. In this environment, the trade elasticity now varies both across countries and with levels of trade costs. In an application, we find that the trade elasticity varies substantially across countries and that the gains from moving from autarky to observed trade are on average between 24% and 28% greater than in a model where the trade elasticity is constant.

Original languageEnglish (US)
Pages (from-to)1619-1646
Number of pages28
JournalInternational Economic Review
Volume60
Issue number4
DOIs
StatePublished - Nov 1 2019
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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