Additive versus multiplicative trade costs and the gains from trade
AbstractThis paper addresses welfare effects from trade liberalization in a heterogeneous-fi?rms trade model including the empirically important per-unit (i.e. additive) trade costs in addition to the conventional iceberg (i.e. multiplicative) and fi?xed trade costs. The novel contribution of the paper is the result that the welfare gain for a given increase in trade openness is higher for reductions in per-unit (additive) trade costs than for reductions in iceberg (multiplicative) trade costs. The ranking derives from differences in intra-industry reallocations and in particular from dissimilar impacts on the number of exporters (i.e., the extensive margin of trade).
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2012-07.
Date of creation: 21 Feb 2012
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Web page: http://www.econ.au.dk/afn/
iceberg trade costs; per-unit;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-INT-2012-03-08 (International Trade)
- NEP-TRE-2012-03-08 (Transport Economics)
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