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Staggered Adjustment and Trade Dynamics

  • Samuel S. Kortum

    (University of Chicago)

  • Jonathan Eaton

    (Penn State University)

  • Costas Arkolakis

    (Yale University)

We develop a theory of staggered adjustment dynamics in a perfect competition model of trade with a continuum of varieties. New technologies for each variety arrive at a constant rate. The consumer consumes a product produced with a certain technology until an exogenous shock arrives. This shock signals her to optimize among all producers from all the countries. The model delivers structural equations for the impact of past trade on current trade. We use the model to explore the gradual adjustment of trade due to changes in trade costs.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1322.

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Date of creation: 2011
Date of revision:
Handle: RePEc:red:sed011:1322
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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