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Putting industries into the Eaton--Kortum model

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  • Serge Shikher

Abstract

The article introduces the industry dimension into the Eaton-Kortum model of trade. Industries are linked with each other by domestic and international trade in intermediate goods. The model is parametrized using data for eight industries in 1989. It is used to perform several counterfactual simulations that are relevant to today's policy debates. First, the model is used to study the effects of the US--EU trade wars. It is found that trade wars have a greater negative effect on countries with large initial net export positions. It is also found that some trade war scenarios are more beneficial to the US while others to the EU. Second, the model is used to study the effects of trade barrier reductions between the high-income and middle-income countries. The results show that this trade liberalization tends to reinforce the pattern of trade according to technological comparative advantages. The results also show which industries should be targeted for barrier reductions depending on policy goals. The third set of simulations investigates spillovers from the technological growth in the US machinery industry. The results show how geography, technology, and industry links affect the propagation of this growth across countries and industries.

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File URL: http://hdl.handle.net/10.1080/09638199.2010.539704
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 21 (2012)
Issue (Month): 6 (November)
Pages: 807-837

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Handle: RePEc:taf:jitecd:v:21:y:2012:i:6:p:807-837

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Cited by:
  1. Julian di Giovanni & Andrei A. Levchenko & Jing Zhang, 2014. "The Global Welfare Impact of China: Trade Integration and Technological Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(3), pages 153-83, July.
  2. Costinot, Arnaud & Rodriguez-Clare, Andres, 2013. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," CEPR Discussion Papers 9398, C.E.P.R. Discussion Papers.
  3. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Trade-revealed TFP," MPRA Paper 16951, University Library of Munich, Germany.
  4. Andrei A. Levchenko & Jing Zhang, 2013. "Ricardian Productivity Differences and the Gains from Trade," NBER Working Papers 19641, National Bureau of Economic Research, Inc.
  5. Jing Zhang & Andrei A. Levchenko, 2011. "The Evolution of Comparative Advantage: Measurement and Welfare Implications," 2011 Meeting Papers 302, Society for Economic Dynamics.
  6. Jing Zhang, 2013. "Global Welfare Impact of China: Trade Integration and Technology Change," 2013 Meeting Papers 630, Society for Economic Dynamics.
  7. Jing Zhang & Andrei A. Levchenko, 2011. "Comparative Advantage and the Welfare Impact of European Integration," 2011 Meeting Papers 819, Society for Economic Dynamics.
  8. David H. Autor & David Dorn & Gordon H. Hanson & Jae Song, 2013. "Trade Adjustment: Worker Level Evidence," NBER Working Papers 19226, National Bureau of Economic Research, Inc.
  9. Julian di Giovanni & Jing Zhang & Andrei A. Levchenko, 2012. "The Global Welfare Impact of China," IMF Working Papers 12/79, International Monetary Fund.
  10. Esther Pérez Ruiz & Uffe Mikkelsen, 2012. "The Trade Impact of China on EMU," IMF Working Papers 12/221, International Monetary Fund.

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