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Globalization and the gains from variety: size and openness of countries and the extensive margin

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  • Mohler, Lukas

Abstract

With the seminal work of Feenstra (1994) and its application to the United States by Broda and Weinstein (2006) the gains from variety through trade as suggested by Krugman (1979) have become quantifiable. My paper adds to this literature in different respects: On the theoretical side, the Feenstra ratios are reinterpreted to allow for unobserved growth at the extensive margin. Also, the gains from variety are decomposed regarding countries of origin and industries. On the empirical side, the gains from variety are calculated for the United States and Switzerland, a small open economy. Analyzing the empirical results for these countries as well as data from other OECD economies, it is then argued that size and openness of countries as well as the (unobserved) true growth at the extensive margin are important factors in determining the welfare gains from variety.

Suggested Citation

  • Mohler, Lukas, 2009. "Globalization and the gains from variety: size and openness of countries and the extensive margin," MPRA Paper 17592, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17592
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    References listed on IDEAS

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    Cited by:

    1. Xuan Dong Nguyen, 2014. "Effects of Japan's Economic Partnership Agreements on the Extensive Margin of International Trade," The International Trade Journal, Taylor & Francis Journals, vol. 28(2), pages 169-191, June.
    2. Cristina Manteu & Sónia Cabral, 2010. "Gains from Import Variety: The Case of Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    3. Demian Calin-Vlad, 2013. "Eu enlargement and the gains from trade," FIW Working Paper series 108, FIW.
    4. Battogtvor,Enkhmaa & Majune,Socrates Kraido & Montfaucon, Angella Faith, 2025. "Revisiting the Gains from Trade in EMDEs : The Case of Selected East Asian and East African Economies," Policy Research Working Paper Series 11072, The World Bank.

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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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