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Welfare in models of trade with heterogeneous firms

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Alexandre Janiak ()
Abstract

I illustrate that the welfare improvement property of the Melitz model is due to the shape of the aggregate labor demand curve, which slopes upwards. By slightly changing some assumptions in the model, this curve may have a negative slope. In this case, increases in aggregate productivity result in a reduction in welfare. For example, this may occur when fixed costs are measured in units of aggregate output instead of labor.JEL codes: F12, F16, J23.

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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 253.

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Date of creation: 2008
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Handle: RePEc:edj:ceauch:253

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  1. M. Soledad Arellano & Pablo Serra, 2007. "Marginal Cost Pricing in Hydro-Thermal Power Industries: Is a Capacity Charge Always Needed?," Documentos de Trabajo 238, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  2. Eduardo Engel & Ronald Fischer, 2008. "Optimal Resource Extraction Contracts under Threat of Expropriation," Levine's Bibliography 122247000000001833, UCLA Department of Economics. [Downloadable!]
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  3. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2007. "The Basic Public Finance of Public-Private Partnerships," NBER Working Papers 13284, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Alejandra Mizala & Miguel Urquiola, 2007. "School Markets: The Impact of Information Approximating Schools' Effectiveness," NBER Working Papers 13676, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. David, Quentin & Janiak, Alexandre & Wasmer, Etienne, 2008. "Local Social Capital and Geographical Mobility: A Theory," IZA Discussion Papers 3668, Institute for the Study of Labor (IZA). [Downloadable!]
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