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The US Gains from Trade: Valuation Using the Demand for Foreign Factor Services

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  • Arnaud Costinot
  • Andrés Rodríguez-Clare

Abstract

About 8 cents out of every dollar spent in the United States is spent on imports. What if, because of a wall or some other extreme policy intervention, imports were to remain on the other side of the US border? How much would US consumers be willing to pay to prevent this hypothetical policy change from taking place? The answer to this question represents the welfare cost from autarky or, equivalently, the welfare gains from trade. In this article, we discuss how to evaluate these gains using the demand for foreign factor services. The estimates of gains from trade for the US economy that we review range from 2 to 8 percent of GDP.

Suggested Citation

  • Arnaud Costinot & Andrés Rodríguez-Clare, 2018. "The US Gains from Trade: Valuation Using the Demand for Foreign Factor Services," NBER Working Papers 24407, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24407
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    Cited by:

    1. Lionel Fontagné & Houssein Guimbard & Gianluca Orefice, 2019. "Product-Level Trade Elasticities," Working Papers 2019-17, CEPII research center.
    2. Ramanarayanan, Ananth, 2020. "Imported inputs and the gains from trade," Journal of International Economics, Elsevier, vol. 122(C).
    3. Fontagné, Lionel & Guimbard, Houssein & Orefice, Gianluca, 2022. "Tariff-based product-level trade elasticities," Journal of International Economics, Elsevier, vol. 137(C).
    4. Gabriele Camera & Lukas Hohl & Rolf Weder, 2023. "Inequality as a barrier to economic integration? An experiment," Experimental Economics, Springer;Economic Science Association, vol. 26(2), pages 383-411, April.
    5. Ufuk Akcigit & Sina T. Ates & Giammario Impullitti, 2018. "Innovation and Trade Policy in a Globalized World," NBER Working Papers 24543, National Bureau of Economic Research, Inc.
    6. Francesca de Nicola & Martin Kessler & Ha Nguyen, 2020. "The financial costs of the United States-China trade tensions: evidence from East Asian stock markets," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 803-833, November.
    7. Costinot, Arnaud & Werning, Iván, 2018. "Robots, Trade, and Luddism: A Sufficient Statistic Approach to Optimal Technology Regulation," CEPR Discussion Papers 13209, C.E.P.R. Discussion Papers.
    8. Clancy, Daragh & Valenta, Vilém & Smith, Donal, 2023. "The macroeconomic effects of global supply chain reorientation," Research Technical Papers 5/RT/23, Central Bank of Ireland.
    9. Miaojie Yu, 2020. "China-US Trade War and Trade Talk," Springer Books, Springer, number 978-981-15-3785-1, January.
    10. Fally, Thibault, 2019. "Generalized separability and the gains from trade," Economics Letters, Elsevier, vol. 178(C), pages 8-12.
    11. Yang, Anton C., 2020. "Structural Estimation of a Gravity Model of Trade with the Constant-Difference-of-Elasticities Preferences," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304636, Agricultural and Applied Economics Association.
    12. Hrishikesh D. Vinod & P. M. Rao, 2019. "Externalities from Intra-Firm Trade by U.S. Multinationals," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(4), pages 389-397, November.
    13. Timon Bohn & Steven Brakman & Erik Dietzenbacher, 2019. "Who's afraid of Virginia WU? The labor composition and labor gains of trade," CESifo Working Paper Series 7527, CESifo.
    14. Giri, Rahul & Yi, Kei-Mu & Yilmazkuday, Hakan, 2021. "Gains from trade: Does sectoral heterogeneity matter?," Journal of International Economics, Elsevier, vol. 129(C).
    15. Dave Donaldson, 2022. "Blending Theory and Data: A Space Odyssey," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 185-210, Summer.
    16. Colantone, Italo & Crinò, Rosario & Ogliari, Laura, 2019. "Globalization and mental distress," Journal of International Economics, Elsevier, vol. 119(C), pages 181-207.
    17. Jon R. Neill, 2021. "Comparing Some Benefits and Costs from Eliminating the U.S. Trade Deficit with Low Wage Countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 27(2), pages 91-103, May.
    18. Bajzik, Josef & Havranek, Tomas & Irsova, Zuzana & Schwarz, Jiri, 2020. "Estimating the Armington elasticity: The importance of study design and publication bias," Journal of International Economics, Elsevier, vol. 127(C).
    19. Lionel Fontagné & Houssein Guimbard & Gianluca Orefice, 2020. "Product-Level Trade Elasticities: Worth Weighting For," Working Papers DT/2020/08, DIAL (Développement, Institutions et Mondialisation).
    20. da Costa, Carlos E. & Santos, Marcelo R., 2023. "Progressive consumption taxes," Journal of Public Economics, Elsevier, vol. 220(C).
    21. Lu, Zhou & Gozgor, Giray & Mahalik, Mantu Kumar & Padhan, Hemachandra & Yan, Cheng, 2022. "Welfare gains from international trade and renewable energy demand: Evidence from the OECD countries," Energy Economics, Elsevier, vol. 112(C).

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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