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Goods Trade, Factor Mobility and Welfare

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  • Stephen J. Redding

Abstract

We develop a quantitative spatial model that incorporates a rich geography of trade and imperfect labor mobility between locations. We provide general results for the existence, uniqueness and comparative statics of the equilibrium. We show how the model can be used to undertake counterfactuals using only data in an initial equilibrium. In these counterfactuals, the welfare gains from trade depend on changes in both domestic trade shares and reallocations of population across locations. We show that factor mobility introduces quantitatively relevant differences in the counterfactual predictions of constant and increasing returns to scale models.

Suggested Citation

  • Stephen J. Redding, 2012. "Goods Trade, Factor Mobility and Welfare," NBER Working Papers 18008, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18008
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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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