Goods Trade, Factor Mobility and Welfare
AbstractThis 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 InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1140.
Date of creation: Apr 2012
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International trade; factor mobility; welfare gains from trade;
Other versions of this item:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
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