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Information, International Substitutability, and Globalization

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James E. Rauch
Vitor Trindade

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Abstract

Improved information allows home firms to rule out more potential foreign trade partners in advance of attempting to form a match. The increased responsiveness to country wage or goods price differentials resulting from this better first cut causes the general-equilibrium elasticity of substitution between national labor forces or the Armington elasticity of substitution between domestic and imported output to increase. Further results include an increase in the elasticity of domestic labor demand, an increase in the extent to which reductions in conventional trade barriers equalize national wages, and reduced "natural protection" for domestic producers.

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File URL: http://hdl.handle.net/10.1257/000282803322157089
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File URL: http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=3&article=14&issue_date=June2003
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 775-791
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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:775-791

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Grossman, G.M. & Helpman, E., 2002. "Outsourcing in a Global Economy," Papers 218, Princeton, Woodrow Wilson School - Public and International Affairs.
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  2. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December. [Downloadable!] (restricted)
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  3. Nicita, Alessandro & Olarreaga, Marcelo, 2000. "Exports and information spillovers," Policy Research Working Paper Series 2474, The World Bank. [Downloadable!]
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  4. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February. [Downloadable!] (restricted)
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  5. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August. [Downloadable!] (restricted)
  7. Chadha, R. & Pohit, S. & Deardorff, A.V. & Stern, R.M., 1997. "Analysis of India's Policy Reforms," Working Papers 413, Research Seminar in International Economics, University of Michigan.
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  8. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mine Zeynep Senses, 2006. "The Effects of Outsourcing on the Elasticity of Labor Demand," Working Papers 06-07, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  2. Giovanni S.F. Bruno & Anna M. Falzoni & Rodolfo Helg, 2004. "Measuring the effect of globalization on labour demand elasticity: An empirical application to OECD countries," CESPRI Working Papers 153, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Feb 2004. [Downloadable!]
  3. Deborah Swenson, 2005. "Outsourcing Price Decisions: Evidence from U.S. 9802 Imports," NBER Working Papers 11184, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. T. Huw Edwards, 2006. "Search and the Path-Dependency of Trade," Discussion Paper Series 2006_12, Department of Economics, Loughborough University, revised May 2006. [Downloadable!]
  5. Alan M. Taylor & Janine L. F. Wilson, 2006. "International Trade and Finance under the Two Hegemons: Complementaries in the United Kingdom 1870-1913 and the United States 1920-30," NBER Working Papers 12543, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Diego Puga & Daniel Trefler, 2009. "Wake up and smell the ginseng: International trade and the rise of incremental innovation in low-wage countries," Working Papers 2009-01, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales. [Downloadable!]
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  7. Deborah L. Swenson, 2007. "Multinationals and the Creation of Chinese Trade Linkages," NBER Working Papers 13271, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. repec:bep:eapadv:v:4:y:2004:i:1:p:1071-1071 is not listed on IDEAS
  9. Marianne Saam, 2005. "Openness To Trade as a Determinant of the Elasticity of Substitution between Capital and Labor," DEGIT Conference Papers c010_013, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  10. Adrian Wood (QEH), . "Openness is a Matter of Degree: How Trade Costs Reduce Demand Elasticities," QEH Working Papers qehwps169, Queen Elizabeth House, University of Oxford. [Downloadable!]
  11. Ni, Shawn X & Ratti, Ronald A., 2009. "Heterogeneous Parameter Uncertainty and the Timing of Investment during Crisis," Economics Discussion Papers 2009-12, Kiel Institute for the World Economy. [Downloadable!]
  12. Luis Araujo & Emanuel Ornelas, 2005. "Trust-Based Trade," IBMEC RJ Economics Discussion Papers 2005-08, Economics Research Group, IBMEC Business School - Rio de Janeiro. [Downloadable!]
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  13. Gawande, Kishore & Maloney, William & Montes Rojas, Gabriel V., 2009. "Foreign informational lobbying can enhance tourism : evidence from the Caribbean," Policy Research Working Paper Series 4834, The World Bank. [Downloadable!]
  14. Maurice Obstfeld, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," Center for International and Development Economics Research, Working Paper Series 1022, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  15. Gawande, Kishore & Maloney, William & Rojas, Gabriel V. Montes, 2007. "Can foreign lobbying enhance development ? The case of tourism in the Caribbean," Policy Research Working Paper Series 4275, The World Bank. [Downloadable!]
  16. James Anderson, 2009. "Does trade foster contract enforcement?," Economic Theory, Springer, vol. 41(1), pages 105-130, October. [Downloadable!] (restricted)
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