Variety Gains from Trade in Switzerland
AbstractSince the seminal work of Krugman (1979), variety gains from trade are recognized as an important channel of welfare gains. In this paper, the gains from variety are estimated for Switzerland. It is found that despite the openness of the Swiss economy these gains are not substantial and smaller than in other countries; specifically compared to the gains in the United States. It is shown that the reasons for this result are twofold: First, the Swiss imports are shown not to be as differentiated as their U.S. counterparts; consequently, new varieties do not provide the same value to consumers. Second, variety growth of imports in Switzerland is much smaller compared to variety growth in larger countries. It is furthermore shown that this latter effect is quantitatively more important than the first.
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Bibliographic InfoArticle provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.
Volume (Year): 147 (2011)
Issue (Month): I (March)
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welfare gains from trade; trade in variety; small open economy;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
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- Christian Hepenstrick, 2011. "The sources and magnitudes of Switzerland’s gains from trade," ECON - Working Papers 006, Department of Economics - University of Zurich.
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