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Implications of the Eaton-Kortum Model of International Trade


  • Robert E. Lucas, Jr.
  • Fernando Alvarez


This paper develops a general equilibrium model of world trade, based on the technology proposed by Eaton and Kortum. We study the existence and uniqueness of equilibrium. We propose and test an algorithm for calculating equilibria. We test the ability of a calibrated version of the model to account for trade volumes, and use the theory to simulate the gains from hypothetical trade liberalizations.

Suggested Citation

  • Robert E. Lucas, Jr. & Fernando Alvarez, 2004. "Implications of the Eaton-Kortum Model of International Trade," 2004 Meeting Papers 623, Society for Economic Dynamics.
  • Handle: RePEc:red:sed004:623

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    More about this item


    trade; volume; gains;

    JEL classification:

    • F - International Economics
    • E - Macroeconomics and Monetary Economics


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