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Why Trade Matters After All

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  • Ralph Ossa
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    Abstract

    I show that accounting for cross-industry variation in trade elasticities greatly magnifies the estimated gains from trade. The main idea is as simple as it is general: While imports in the average industry do not matter too much, imports in some industries are critical to the functioning of the economy, so that a complete shutdown of international trade is very costly overall.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18113.

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    Date of creation: May 2012
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    Handle: RePEc:nbr:nberwo:18113

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    References

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    1. Robert C. Feenstra, 1996. "U.S. Imports, 1972-1994: Data and Concordances," NBER Working Papers 5515, National Bureau of Economic Research, Inc.
    2. Emi Nakamura & Jón Steinsson, 2010. "Monetary Non-Neutrality in a Multisector Menu Cost Model," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 961-1013, August.
    3. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    4. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    5. Christian Broda & David Weinstein, 2004. "Globalization and the gains from variety," Staff Reports 180, Federal Reserve Bank of New York.
    6. Justin R. Pierce & Peter K. Schott, 2012. "Concording U.S. Harmonized System categories over time," Finance and Economics Discussion Series 2012-16, Board of Governors of the Federal Reserve System (U.S.).
    7. Chang-Tai Hsieh & Ralph Ossa, 2011. "A Global View of Productivity Growth in China," NBER Working Papers 16778, National Bureau of Economic Research, Inc.
    8. Charles I. Jones, 2011. "Intermediate Goods and Weak Links in the Theory of Economic Development," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(2), pages 1-28, April.
    9. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    10. Daniel Yi Xu, 2013. "Competition, Markups, and the Gains from International Trade," 2013 Meeting Papers 653, Society for Economic Dynamics.
    11. Justin R. Pierce & Peter K. Schott, 2012. "A concordance between ten-digit U.S. Harmonized System codes and SIC/NAICS product classes and industries," Finance and Economics Discussion Series 2012-15, Board of Governors of the Federal Reserve System (U.S.).
    12. Ralph Ossa, 2011. "Trade Wars and Trade Talks with Data," NBER Working Papers 17347, National Bureau of Economic Research, Inc.
    13. 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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    Citations

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    Cited by:
    1. Peter Neary & Monika Mrazova, 2014. "Together at Last: Trade Costs, Demand Structure, and Welfare," Economics Series Working Papers 694, University of Oxford, Department of Economics.
    2. Jung, Benjamin & Felbermayr, Gabriel & Larch, Mario, 2013. "Icebergs versus Tariffs: A Quantitative Perspective on the Gains from Trade," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79707, Verein für Socialpolitik / German Economic Association.
    3. Moritz Ritter, . "Offshoring and occupational specificity of human capital," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    4. Holger Breinlich & Alejandro Cuñat, 2013. "Tariffs, Trade and Productivity: A Quantitative Evaluation of Heterogeneous Firm Models," CeFiG Working Papers 20, Center for Firms in the Global Economy, revised 10 Jul 2013.
    5. Ferdinando Monte, 2014. "Local Transmission of Trade Shocks," Working Papers 2014-001, Human Capital and Economic Opportunity Working Group.
    6. Lorenzo Caliendo & Fernando Parro, 2012. "Estimates of the Trade and Welfare Effects of NAFTA," NBER Working Papers 18508, National Bureau of Economic Research, Inc.
    7. Andrei A. Levchenko & Jing Zhang, 2013. "Ricardian Productivity Differences and the Gains from Trade," NBER Working Papers 19641, National Bureau of Economic Research, Inc.
    8. Assaf Zimring, 2013. "Gains from Trade: Lessons from the Gaza Blockade 2007-2010," Discussion Papers 12-024, Stanford Institute for Economic Policy Research.
    9. Pierre-Daniel G. Sarte & Esteban Rossi-Hansberg & Fernando Parro & Lorenzo Caliendo, 2013. "The impact of regional and sectoral productivity changes on the U.S. economy," Working Paper 13-14, Federal Reserve Bank of Richmond.
    10. Cipollina, Maria & Laborde, David & Salvatici, Luca, 2013. "Do Preferential Trade Policies (Actually) Increase Exports? An analysis of EU trade policies," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150177, Agricultural and Applied Economics Association.

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