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Goods Trade, Factor Mobility and Welfare

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  • Stephen J. Redding

Abstract

This paper extends a recent class of quantitative models of international trade to incorporate factor mobility within countries. We present a model-based decomposition of the variance of economic activity into the contributions of locational fundamentals, market access and their covariance. We show how the standard framework for undertaking model-based counterfactuals in trade can be augmented to obtain predictions for endogenous changes in the distribution of economic activity across regions within countries. A region's trade share with itself is no longer a sufficient statistic for the welfare gains from trade, which also depend on endogenous changes in the distribution of mobile factors.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1140.

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Date of creation: Apr 2012
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Handle: RePEc:cep:cepdps:dp1140

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: International trade; factor mobility; welfare gains from trade;

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  1. James E. Rauch, 1990. "Comparative Advantage, Geographic Advantage, and the Volume of Trade," NBER Working Papers 3512, National Bureau of Economic Research, Inc.
  2. Eaton, Jonathan & Kortum, Sam & Neiman, Brent & Romalis, John, 2013. "Trade and the Global Recession," Working Papers, University of Sydney, School of Economics 2013-21, University of Sydney, School of Economics.
  3. Michaels, Guy & Rauch, Ferdinand & Redding, Stephen J, 2008. "Urbanization and Structural Transformation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7016, C.E.P.R. Discussion Papers.
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  17. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, American Economic Association, vol. 91(4), pages 858-876, September.
  18. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, American Economic Association, vol. 102(1), pages 94-130, February.
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Cited by:
  1. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, Elsevier, in: Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779 Elsevier.
  2. Natalia Ramondo & Andrés Rodríguez-Clare & Milagro Saborío-Rodríguez, 2012. "Scale Effects and Productivity Across Countries: Does Country Size Matter?," NBER Working Papers 18532, National Bureau of Economic Research, Inc.
  3. Stephen J. Redding & Matthew A. Turner, 2014. "Transportation Costs and the Spatial Organization of Economic Activity," NBER Working Papers 20235, National Bureau of Economic Research, Inc.
  4. A. Kerem Coşar & Pablo D. Fajgelbaum, 2013. "Internal Geography, International Trade, and Regional Specialization," NBER Working Papers 19697, National Bureau of Economic Research, Inc.
  5. Pablo Fajgelbaum & Stephen J. Redding, 2014. "External Integration, Structural Transformation and Economic Development: Evidence From Argentina," CEP Discussion Papers, Centre for Economic Performance, LSE dp1273, Centre for Economic Performance, LSE.
  6. Pablo Fajgelbaum & Stephen J. Redding, 2014. "External Integration, Structural Transformation and Economic Development: Evidence from Argentina 1870-1914," NBER Working Papers 20217, National Bureau of Economic Research, Inc.
  7. repec:clg:wpaper:2013-28 is not listed on IDEAS

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