Unilateral Trade Liberalization in the Melitz Model: A Note
In the two-country Melitz (2003) model, unilateral trade liberalization is often cast as a reduction of iceberg transportation costs and wages are determined by a linear outside sector. We show that welfare results reverse when wages adjust and trade frictions are revenue-generating tariffs.
Volume (Year): 32 (2012)
Issue (Month): 2 ()
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