Advanced Search
MyIDEAS: Login to save this article or follow this journal

Globalization and individual gains from trade

Contents:

Author Info

  • Behrens, Kristian
  • Murata, Yasusada

Abstract

We analyze the impact of globalization on individual gains from trade in a general equilibrium model of monopolistic competition featuring product diversity, pro-competitive effects and income heterogeneity between and within countries. Although trade reduces markups in both countries in our framework, its impact on variety depends on their relative position in the world income distribution: product diversity in the lower income country always expands, while that in the higher income country may shrink. When the latter occurs, the richer consumers in the higher income country may lose from trade because the relative importance of variety versus quantity increases with income. Using data on GDP per capita and population, as well as on the U.S. income distribution, our theoretical results are illustrated in two different contexts: the hypothetical bilateral trade liberalization between the U.S. and 188 countries; and the historical sequence of U.S. free trade agreements since 1985.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0304393212001158
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 59 (2012)
Issue (Month): 8 ()
Pages: 703-720

as in new window
Handle: RePEc:eee:moneco:v:59:y:2012:i:8:p:703-720

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505566

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2009. "Trade, Wages and Productivity," CEP Discussion Papers dp0942, Centre for Economic Performance, LSE.
  2. Christian Broda & David E. Weinstein, 2004. "Globalization and the Gains from Variety," NBER Working Papers 10314, National Bureau of Economic Research, Inc.
  3. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-22, December.
  4. Stokey, Nancy L, 1991. "The Volume and Composition of Trade between Rich and Poor Countries," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 63-80, January.
  5. Edward J. Balistreri, 1997. "The Performance of the Heckscher-Ohlin-Vanek Model in Predicting Endogenous Policy Forces at the Individual Level," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 1-17, February.
  6. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  7. Behrens, Kristian & Murata, Yasusada, 2012. "Trade, competition, and efficiency," Journal of International Economics, Elsevier, vol. 87(1), pages 1-17.
  8. Salem, A B Z & Mount, T D, 1974. "A Convenient Descriptive Model of Income Distribution: The Gamma Density," Econometrica, Econometric Society, vol. 42(6), pages 1115-27, November.
  9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  10. Gilles Saint-Paul, 2006. "Distribution and Growth in an Economy with Limited Needs: Variable Markups and 'the End of Work'," Economic Journal, Royal Economic Society, vol. 116(511), pages 382-407, 04.
  11. Pablo D. Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2009. "Income Distribution, Product Quality, and International Trade," NBER Working Papers 15329, National Bureau of Economic Research, Inc.
  12. Scheve, Kenneth F. & Slaughter, Matthew J., 2001. "What determines individual trade-policy preferences?," Journal of International Economics, Elsevier, vol. 54(2), pages 267-292, August.
  13. Robert E. Baldwin & L. Alan Winters, 2004. "Challenges to Globalization: Analyzing the Economics," NBER Books, National Bureau of Economic Research, Inc, number bald04-1, October.
  14. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
  15. Carl Hamilton, 2004. "Globalization and Democracy," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 63-92 National Bureau of Economic Research, Inc.
  16. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2009. "Inequality and Unemployment in a Global Economy," CEP Discussion Papers dp0940, Centre for Economic Performance, LSE.
  17. Jaskold Gabszewicz, Jean & Vial, Jean-Philippe, 1972. "Oligopoly "A la cournot" in a general equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 4(3), pages 381-400, June.
  18. Richard E. Baldwin & Rikard Forslid, 2006. "Trade Liberalization with Heterogenous Firms," NBER Working Papers 12192, National Bureau of Economic Research, Inc.
  19. Paolo Epifani & Gino Gancia, 2009. "Trade, Markup Heterogeneity and Misallocations," KITeS Working Papers 005, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Apr 2009.
  20. Levinsohn, J., 1991. "Testing the Imports-As-Market-Discipline Hypothesis," Working Papers 272, Research Seminar in International Economics, University of Michigan.
  21. Lawrence, Colin & Spiller, Pablo T, 1983. "Product Diversity, Economies of Scale, and International Trade," The Quarterly Journal of Economics, MIT Press, vol. 98(1), pages 63-83, February.
  22. Feenstra, Robert C., 2003. "A homothetic utility function for monopolistic competition models, without constant price elasticity," Economics Letters, Elsevier, vol. 78(1), pages 79-86, January.
  23. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  24. Mayda, Anna Maria & Rodrik, Dani, 2001. "Why are Some People (and Countries) More Protectionist than Others?," CEPR Discussion Papers 2960, C.E.P.R. Discussion Papers.
  25. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  26. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  27. Pablo D. Fajgelbaum, 2011. "Income Distribution, Product Quality and International Trade," 2011 Meeting Papers 415, Society for Economic Dynamics.
  28. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
  29. Ina Simonovska, 2010. "Income differences and prices of tradables," Globalization and Monetary Policy Institute Working Paper 55, Federal Reserve Bank of Dallas.
  30. Christian Hepenstrick, 2010. "Per-capita incomes and the extensive margin of bilateral trade," IEW - Working Papers 519, Institute for Empirical Research in Economics - University of Zurich.
  31. Costas Arkolakis & Svetlana Demidova & Peter J. Klenow & Andres Rodriguez-Clare, 2008. "Endogenous Variety and the Gains from Trade," American Economic Review, American Economic Association, vol. 98(2), pages 444-50, May.
  32. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  33. Kiminori Matsuyama, 1999. "A Ricardian Model with a Continuum of Goods under Non-homothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade," Discussion Papers 1241, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  34. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
  35. Harald Badinger, 2007. "Has the EU's Single Market Programme Fostered Competition? Testing for a Decrease in Mark-up Ratios in EU Industries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(4), pages 497-519, 08.
  36. Behrens, Kristian & Murata, Yasusada, 2007. "General equilibrium models of monopolistic competition: A new approach," Journal of Economic Theory, Elsevier, vol. 136(1), pages 776-787, September.
  37. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  38. Yasusada Murata, 2009. "On the Number and the Composition of Varieties," Economic Journal, Royal Economic Society, vol. 119(539), pages 1065-1087, 07.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Globalization and Individual Gains from Trade
    by Martin Berka in NEP-OPM blog on 2009-09-27 21:14:37
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Suedekum, Jens, 2013. "Spatial Frictions," IZA Discussion Papers 7175, Institute for the Study of Labor (IZA).
  2. Kevin Wiseman, 2010. "Location, Productivity, and Trade," 2010 Meeting Papers 671, Society for Economic Dynamics.
  3. Behrens, Kristian & Murata, Yasusada, 2012. "Trade, competition, and efficiency," Journal of International Economics, Elsevier, vol. 87(1), pages 1-17.
  4. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2009. "Trade, wages and productivity," Working Paper Research 161, National Bank of Belgium.
  5. Kristian Behrens & Yasusada Murata, 2011. "Trade, Competition, and Efficiency (revised version)," Cahiers de recherche 1118, CIRPEE.
  6. Föllmi, Reto & Hepenstrick, Christian & Zweimüller, Josef, 2011. "Non-homothetic preferences, parallel imports and the extensive margin of international trade," Economics Working Paper Series 1122, University of St. Gallen, School of Economics and Political Science.
  7. Robert C. Feenstra, 2014. "Restoring the Product Variety and Pro-competitive Gains from Trade with Heterogeneous Firms and Bounded Productivity," NBER Working Papers 19833, National Bureau of Economic Research, Inc.
  8. Pokrovsky Dmitry & Behrens Kristian & Zhelobodko Evgeny, 2014. "Market Size, Entrepreneurship, and Income Inequality," EERC Working Paper Series 14/01e, EERC Research Network, Russia and CIS.
  9. Alexander Tarasov, 2014. "Preferences and income effects in monopolistic competition models," Social Choice and Welfare, Springer, vol. 42(3), pages 647-669, March.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:59:y:2012:i:8:p:703-720. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.