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Information, International Substitutability, and Globalization

Author

Listed:
  • James E. Rauch
  • Vitor Trindade

Abstract

Improved information allows home firms to rule out more potential foreign trade partners in advance of attempting to form a match. The increased responsiveness to country wage or goods price differentials resulting from this better first cut causes the general-equilibrium elasticity of substitution between national labor forces or the Armington elasticity of substitution between domestic and imported output to increase. Further results include an increase in the elasticity of domestic labor demand, an increase in the extent to which reductions in conventional trade barriers equalize national wages, and reduced "natural protection" for domestic producers.

Suggested Citation

  • James E. Rauch & Vitor Trindade, 2003. "Information, International Substitutability, and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 775-791, June.
  • Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:775-791
    Note: DOI: 10.1257/000282803322157089
    as

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    References listed on IDEAS

    as
    1. Portes, Richard & Rey, Helene, 2005. "The determinants of cross-border equity flows," Journal of International Economics, Elsevier, vol. 65(2), pages 269-296, March.
    2. Olarreaga, Marcelo, 2000. "Exports and Information Spillovers," CEPR Discussion Papers 2560, C.E.P.R. Discussion Papers.
    3. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    4. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 135-159.
    5. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
    6. repec:pri:wwseco:dp218 is not listed on IDEAS
    7. Bruce A. Blonigen & Wesley W. Wilson, 1999. "Explaining Armington: What Determines Substitutability Between Home and Foreign Goods?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 1-21, February.
    8. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    9. Rajesh Chadha & Sanjib Pohit & Alan V. Deardorff & Robert M. Stern, 1998. "Analysis of India's Policy Reforms," The World Economy, Wiley Blackwell, vol. 21(2), pages 235-259, March.
    10. G. D. A. MacDougall, 1960. "THE BENEFITS and COSTS OF PRIVATE INVESTMENT FROM ABROAD: A THEORETICAL APPROACH," The Economic Record, The Economic Society of Australia, vol. 36(73), pages 13-35, March.
    11. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
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