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Goods Trade, Factor Mobility and Welfare

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  • Stephen J. Redding

Abstract

Much trade occurs intra-nationally across regions within countries, where not only goods but also factors of production are mobile across locations. This paper extends a recent class of quantitative trade models to incorporate factor mobility. We generalize the standard approach to undertaking counterfactuals in these models to allow for endogenous reallocations of mobile factors across locations. We show that each location’s trade share with itself is no longer a sufficient statistic for the welfare gains from trade. We derive a bias correction term for adjusting the standard measure of the aggregate welfare gains from trade to take into account these endogenous reallocations of resources.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18008.

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Date of creation: Apr 2012
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Handle: RePEc:nbr:nberwo:18008

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  1. Arnaud Costinot & Dave Donaldson & Ivana Komunjer, 2012. "What Goods Do Countries Trade? A Quantitative Exploration of Ricardo's Ideas," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 581-608.
  2. Courant Paul N. & Deardorff Alan V., 1993. "Amenities, Nontraded Goods, and the Trade of Lumpy Countries," Journal of Urban Economics, Elsevier, vol. 34(2), pages 299-317, September.
  3. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers, Society for Economic Dynamics 433, Society for Economic Dynamics.
  4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195102680, October.
  5. Courant, P.N. & Deardorff, A.V., 1989. "International Trade With Lumpy Countries," Papers, Michigan - Center for Research on Economic & Social Theory 90-04, Michigan - Center for Research on Economic & Social Theory.
  6. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  7. Sam Kortum & John Romalis & Brent Neiman & Jonathan Eaton, 2010. "Trade and the Global Recession," 2010 Meeting Papers, Society for Economic Dynamics 1340, Society for Economic Dynamics.
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  10. Ralph Ossa, 2011. "Trade Wars and Trade Talks with Data," NBER Working Papers 17347, National Bureau of Economic Research, Inc.
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  12. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
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  17. Ana Cecília Fieler, 2011. "Nonhomotheticity and Bilateral Trade: Evidence and a Quantitative Explanation," Econometrica, Econometric Society, Econometric Society, vol. 79(4), pages 1069-1101, 07.
  18. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, Elsevier, vol. 14(3-4), pages 341-356, May.
  19. Lorenzo Caliendo & Fernando Parro, 2012. "Estimates of the Trade and Welfare Effects of NAFTA," NBER Working Papers 18508, National Bureau of Economic Research, Inc.
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  21. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
  22. 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.
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Citations

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Cited by:
  1. Pablo Fajgelbaum & Stephen J. Redding, 2014. "External Integration, Structural Transformation and Economic Development: Evidence From Argentina," CEP Discussion Papers dp1273, Centre for Economic Performance, LSE.
  2. repec:clg:wpaper:2013-28 is not listed on IDEAS
  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. 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.
  6. Breinlich, Holger & Ottaviano, Gianmarco & Temple, Jonathan, 2013. "Regional Growth and Regional Decline," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9568, C.E.P.R. Discussion Papers.
  7. 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.

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