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Firm heterogeneity and costly trade: A new estimation strategy and policy experiments

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  • Cherkashin, Ivan
  • Demidova, Svetlana
  • Kee, Hiau Looi
  • Krishna, Kala

Abstract

We build a tractable partial equilibrium model in the spirit of Melitz (2003) to help understand the role of trade preferences given to developing countries, as well as the efficacy of various subsidy policies. The model allows for firm level heterogeneity in both demand and productivity and lets the mass of firms that enter be endogenous.

Suggested Citation

  • Cherkashin, Ivan & Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2015. "Firm heterogeneity and costly trade: A new estimation strategy and policy experiments," Journal of International Economics, Elsevier, vol. 96(1), pages 18-36.
  • Handle: RePEc:eee:inecon:v:96:y:2015:i:1:p:18-36
    DOI: 10.1016/j.jinteco.2014.12.007
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    More about this item

    Keywords

    Rules of origin; Firm heterogeneity; Demand shocks; Policy experiments;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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