IDEAS home Printed from
   My bibliography  Save this paper

International Trade and Search


  • Pertti Haaparanta

    (Helsinki School of Economics)


The standard model of international trade based on Dixit-Stiglitz theory of monopolistic competition originally developed by Helpman and Krugman is extended to allow for costly search and matching between producers of different varieties and retailers. This extension provides a new way of characterizing how the economy is divided in closed and open sectors. Trade policies will naturally have an effect on this division. The entry and exit of retailers and producers is modeled. It is shown that these (both gross and temporarily also net) flows (and the associated job flows) are affected by policies. Tariffs increase gross flows of retailers relative to producers. Gross flows will also be increased in the sector favored by policies. This provides a potentially fruitful hypothesis for empirical work. In contrast to the standard model, trade policies have also an effect on the scale of output by individual producers. Finally, the welfare effects of tariffs are surprising. Tariffs can improve welfare if they switch enough productive resources from the producers in the matching process relative to producers already matched and producing. This result is new to the literature.

Suggested Citation

  • Pertti Haaparanta, 2000. "International Trade and Search," Econometric Society World Congress 2000 Contributed Papers 0858, Econometric Society.
  • Handle: RePEc:ecm:wc2000:0858

    Download full text from publisher

    File URL:
    File Function: main text
    Download Restriction: no

    References listed on IDEAS

    1. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    2. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    3. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
    4. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, January.
    5. repec:hhs:iuiwop:430 is not listed on IDEAS
    6. Matti Liski & Juha Virrankoski, 2000. "Bilateral C02 Trading," Econometric Society World Congress 2000 Contributed Papers 1312, Econometric Society.
    7. Kultti, Klaus, 2000. "About bargaining power," Economics Letters, Elsevier, vol. 69(3), pages 341-344, December.
    8. Ricardo Caballero & Muhammad Hammour, 1998. "Improper Churn: Social Costs and Macroeconomic Consequences," Working papers 98-11, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    10. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-1368, December.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:0858. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.