Variety gains of trade integration in a heterogeneous firm model
AbstractThe present paper studies the variety gains from trade integration. Applying a heterogenous firm model we simulate trade liberalisation in alternative integration scenarios, where per unit trade costs, fixed trade costs and both of them are reduced. The main innovation of our paper is that we estimate the structural parameters of the underlying heterogenous firm model econometrically based on a unique firm level panel data, which contains more than 250,000 observations for exporting firms. Our results suggest that the variety gains from trade integration are substantial. Reducing trade barriers by 15 percent induces variety growth, as a result of which the gains from trade integration are up to 17 percent higher than classical trade models would predict.
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Bibliographic InfoPaper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2010_34.
Date of creation: 14 Oct 2010
Date of revision:
Variety gains; extensive margin; structural estimation; trade integration; heterogenous firms.;
Other versions of this item:
- dâ€™Artis Kancs, 2010. "Variety Gains of Trade I ntegration in a Heterogeneous Firm Model," LICOS Discussion Papers 25810, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
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- Ackerman Maarten & Charlotte du Toit, 2001. "A supply side approach for estimating a Neo-classical fixed investment model for the South African economy," EERI Research Paper Series EERI_RP_2001_05, Economics and Econometrics Research Institute (EERI), Brussels.
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