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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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References

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  18. Michaels, Guy & Rauch, Ferdinand & Redding, Stephen J, 2008. "Urbanization and Structural Transformation," CEPR Discussion Papers 7016, C.E.P.R. Discussion Papers.
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  22. repec:cge:warwcg:13 is not listed on IDEAS
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Citations

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Cited by:
  1. A. Kerem Coşar & Pablo D. Fajgelbaum, 2013. "Internal Geography, International Trade, and Regional Specialization," NBER Working Papers 19697, National Bureau of Economic Research, Inc.
  2. 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.
  3. Holger Breinlich & Gianmarco I. P. Ottaviano & Jonathan R. W. Temple, 2013. "Regional growth and regional decline," LSE Research Online Documents on Economics 51575, London School of Economics and Political Science, LSE Library.
  4. Stephen J. Redding & Matthew A. Turner, 2014. "Transportation Costs and the Spatial Organization of Economic Activity," CEP Discussion Papers dp1277, Centre for Economic Performance, LSE.
  5. repec:clg:wpaper:2013-28 is not listed on IDEAS
  6. 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.
  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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