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

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  • Costinot, Arnaud
  • Rodríguez-Clare, Andres

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

  • Costinot, Arnaud & Rodríguez-Clare, Andres, 2018. "The US Gains From Trade: Valuation Using the Demand for Foreign Factor Services," CEPR Discussion Papers 12788, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12788
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    Cited by:

    1. 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.
    2. Lionel Fontagné & Houssein Guimbard & Gianluca Orefice, 2019. "Product-Level Trade Elasticities," Working Papers 2019-17, CEPII research center.
    3. Ramanarayanan, Ananth, 2020. "Imported inputs and the gains from trade," Journal of International Economics, Elsevier, vol. 122(C).
    4. 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.
    5. Fontagné, Lionel & Guimbard, Houssein & Orefice, Gianluca, 2022. "Tariff-based product-level trade elasticities," Journal of International Economics, Elsevier, vol. 137(C).
    6. 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.
    7. Giri, Rahul & Yi, Kei-Mu & Yilmazkuday, Hakan, 2021. "Gains from trade: Does sectoral heterogeneity matter?," Journal of International Economics, Elsevier, vol. 129(C).
    8. 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.
    9. Dave Donaldson, 2022. "Blending Theory and Data: A Space Odyssey," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 185-210, Summer.
    10. Colantone, Italo & Crinò, Rosario & Ogliari, Laura, 2019. "Globalization and mental distress," Journal of International Economics, Elsevier, vol. 119(C), pages 181-207.
    11. 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.
    12. 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.
    13. Arnaud Costinot & Iván Werning, 2023. "Robots, Trade, and Luddism: A Sufficient Statistic Approach to Optimal Technology Regulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(5), pages 2261-2291.
    14. Daragh Clancy & Donal Smith & Vilém Valenta, 2024. "The Macroeconomic Effects of Global Supply Chain Reorientation," International Journal of Central Banking, International Journal of Central Banking, vol. 20(2), pages 151-191, April.
    15. 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).
    16. Miaojie Yu, 2020. "China-US Trade War and Trade Talk," Springer Books, Springer, number 978-981-15-3785-1, September.
    17. Fally, Thibault, 2019. "Generalized separability and the gains from trade," Economics Letters, Elsevier, vol. 178(C), pages 8-12.
    18. Lionel Fontagné & Houssein Guimbard & Gianluca Orefice, 2020. "Product-Level Trade Elasticities: Worth Weighting For," Working Papers DT/2020/08, DIAL (Développement, Institutions et Mondialisation).
    19. da Costa, Carlos E. & Santos, Marcelo R., 2023. "Progressive consumption taxes," Journal of Public Economics, Elsevier, vol. 220(C).
    20. 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).
    21. 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.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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