IDEAS home Printed from https://ideas.repec.org/p/fip/fedgif/1207.html
   My bibliography  Save this paper

Goods-Market Frictions and International Trade

Author

Listed:
  • Pawel Krolikowski
  • Andrew H. McCallum

Abstract

We present a tractable framework that embeds goods-market frictions in a general equilibrium dynamic model with heterogeneous exporters and identical importers. These frictions arise because it is time consuming and expensive for exporters and importers to meet. We show that search frictions lead to an endogenous fraction of unmatched exporters, alter the gains from trade, endogenize entry costs, and imply that the competitive equilibrium does not generally result in the socially optimal number of searching firms. Finally, ignoring search frictions results in biased estimates of the effect of tariffs on trade flows.

Suggested Citation

  • Pawel Krolikowski & Andrew H. McCallum, 2017. "Goods-Market Frictions and International Trade," International Finance Discussion Papers 1207, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:1207
    DOI: 10.17016/IFDP.2017.1207
    as

    Download full text from publisher

    File URL: https://www.federalreserve.gov/econres/ifdp/files/ifdp1207.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Giulia Brancaccio & Myrto Kalouptsidi & Theodore Papageorgiou, 2017. "Geography, Search Frictions and Endogenous Trade Costs," NBER Working Papers 23581, National Bureau of Economic Research, Inc.
    2. Roc Armenter & Mikl?s Koren, 2014. "A Balls-and-Bins Model of Trade," American Economic Review, American Economic Association, vol. 104(7), pages 2127-2151, July.
    3. Lukasz A. Drozd & Jaromir B. Nosal, 2012. "Understanding International Prices: Customers as Capital," American Economic Review, American Economic Association, vol. 102(1), pages 364-395, February.
    4. Cadot, Olivier & Iacovone, Leonardo & Pierola, Martha Denisse & Rauch, Ferdinand, 2013. "Success and failure of African exporters," Journal of Development Economics, Elsevier, vol. 101(C), pages 284-296.
    5. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
    6. William F. Lincoln & Andrew H. McCallum, 2016. "The Rise of Exporting by U.S. Firms," IFDP Notes 2016-02-02, Board of Governors of the Federal Reserve System (U.S.).
    7. Sugita, Yoichi & Teshima, Kensuke & Seira, Enrique, 2016. "Assortative matching of exporters and importers," IDE Discussion Papers 610, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    8. Tim Schmidt-Eisenlohr & Ryan Monarch, 2015. "Learning and the Value of Relationships in International Trade," 2015 Meeting Papers 668, Society for Economic Dynamics.
    9. Tim Schmidt-Eisenlohr & Ryan Monarch, 2015. "Learning and the Value of Relationships in International Trade," 2015 Meeting Papers 668, Society for Economic Dynamics.
    10. Marcela Eslava & James Tybout & David Jinkins & C. Krizan & Jonathan Eaton, 2015. "A Search and Learning Model of Export Dynamics," 2015 Meeting Papers 1535, Society for Economic Dynamics.
    11. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, March.
    12. Kudoh, Noritaka & Sasaki, Masaru, 2011. "Employment and hours of work," European Economic Review, Elsevier, vol. 55(2), pages 176-192, February.
    13. 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.
    14. 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.
    15. Sebastian Heise, 2016. "Firm-to-Firm Relationships and Price Rigidity - Theory and Evidence," CESifo Working Paper Series 6226, CESifo Group Munich.
    16. Richard Kneller & Mauro Pisu, 2011. "Barriers to Exporting: What are They and Who do They Matter to?," The World Economy, Wiley Blackwell, vol. 34(6), pages 893-930, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew B. Bernard & Andreas Moxnes, 2018. "Networks and Trade," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 65-85, August.
    2. Clemence Lenoir & Isabelle Mejean & Julien Martin, 2018. "Search Frictions in International Good Markets," 2018 Meeting Papers 878, Society for Economic Dynamics.
    3. repec:eee:eecrev:v:102:y:2018:i:c:p:280-297 is not listed on IDEAS

    More about this item

    Keywords

    Search ; Trade ; Goods ; Frictions ; Information;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    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:fip:fedgif:1207. 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: (Ryan Wolfslayer) or (Keisha Fournillier). General contact details of provider: http://edirc.repec.org/data/frbgvus.html .

    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.