Reallocation gains in a specific factors model with firm heterogeneity
We study firm heterogeneity in a specific factors model to address the effect of factor mobility on reallocation gains from trade. A model is proposed with Melitz type firm heterogeneity with two sectors, two countries and two fixed factors and one factor mobile across sectors. Equilibrium in each sector can be concisely represented by a demand and supply equation and a FE and ZCP condition. Varying the substitution elasticity between the fixed and mobile factor we show that the welfare gains from trade liberalization are larger in countries with a lower substitution elasticity. Furthermore, it is shown that the immobile production factor in the comparative disadvantage sector can still gain from trade liberalization due to the reallocation effect.
|Date of creation:||Oct 2011|
|Date of revision:|
|Contact details of provider:|| Fax: +43 732-2468-8238|
Web page: http://www.econ.jku.at/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Costas Arkolakis & Svetlana Demidova & Peter J. Klenow & Andres Rodriguez-Clare, 2008.
"Endogenous Variety and the Gains from Trade,"
American Economic Review,
American Economic Association, vol. 98(2), pages 444-50, May.
- Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September.
- Mark J. Melitz, 2002.
"The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,"
NBER Working Papers
8881, National Bureau of Economic Research, Inc.
- 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.
- Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
- Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2009.
"Trade and Welfare: Does Industrial Organization Matter?,"
CER-ETH Economics working paper series
09/119, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2010. "Trade and welfare: Does industrial organization matter?," Economics Letters, Elsevier, vol. 109(2), pages 85-87, November.
- Bombardini, Matilde, 2008. "Firm heterogeneity and lobby participation," Journal of International Economics, Elsevier, vol. 75(2), pages 329-348, July.
- Erhan Artuc & Shubham Chaudhuri & John McLaren, 2007.
"Trade Shocks and Labor Adjustment: A Structural Empirical Approach,"
NBER Working Papers
13465, National Bureau of Economic Research, Inc.
- Erhan Artu� & Shubham Chaudhuri & John McLaren, 2010. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," American Economic Review, American Economic Association, vol. 100(3), pages 1008-45, June.
When requesting a correction, please mention this item's handle: RePEc:jku:econwp:2011_15. 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: (Ren� B�heim)
If references are entirely missing, you can add them using this form.