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The Social Footprint of Globalization: Towards the Introduction of Strategic Industries in Quantitative Trade Models

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  • Colantone, Italo
  • Ottaviano, Gianmarco
  • Stanig, Piero

Abstract

We argue that our understanding of industrial policy in the presence of `strategic' industries that exert positive externalities on the national economy may benefit from an extension of quantitative general equilibrium trade models making the extent and pattern of trade-induced reallocations more salient. To make these features relevant for national welfare, we introduce the notion of the `social footprint' of globalization as the result of suboptimal trade-induced structural transformation in the presence of externalities. For proof of concept, we use simple workhorse models featuring two countries and two industries (only one of which is `strategic') to highlight the role of the `scale elasticity' of the strategic industry and the consequences of the most common assumptions on market structure in quantitative trade analyses.

Suggested Citation

  • Colantone, Italo & Ottaviano, Gianmarco & Stanig, Piero, 2024. "The Social Footprint of Globalization: Towards the Introduction of Strategic Industries in Quantitative Trade Models," CEPR Discussion Papers 18820, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18820
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    1. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    3. Dominick Bartelme & Arnaud Costinot & Dave Donaldson & Andres Rodriguez-Clare, "undated". "The Textbook Case for Industrial Policy: Theory Meets Data," Working Papers 675, Research Seminar in International Economics, University of Michigan.
    4. Lorenzo Caliendo & Maximiliano Dvorkin & Fernando Parro, 2019. "Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock," Econometrica, Econometric Society, vol. 87(3), pages 741-835, May.
    5. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    6. Dominick Bartelme & Arnaud Costinot & Dave Donaldson & Andrés Rodríguez-Clare, 2025. "The Textbook Case for Industrial Policy: Theory Meets Data," Journal of Political Economy, University of Chicago Press, vol. 133(5), pages 1527-1573.
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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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