IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Global Gains from Reduction of Trade Costs

  • Han QI

    (Hong Kong University of Science and Technology)

  • Haichao Fan

    (Hong Kong University of Science and Technology)

  • Edwin Lai

    (Hong Kong University of Science and Tech)

Registered author(s):

    We derive a simple equation to calculate the global welfare impact of the simultaneous reduction of trade costs between multiple country-pairs. Interestingly, we find that we obtain the same equation for a broad class of trade models. Moreover, balanced trade is mostly not required for the equation to work, nor does trade elasticity need to be known. The global welfare impact only depends on two sets of statistics: (i) the ratio of bilateral trade flow between each pair of trading partners and global income; and (ii) the percentage change in exporting cost for each pair of trading partners. The class of models includes the many-country, many-good neo-classical-type model, and the Armington-type models such as Eaton and Kortum (2002), Krugman (1980), Melitz (2003) with Pareto distribution of firm productivity, and the extensions of these models to the multi-country and multi-sector case, multi-factor production technology, multi-stage production, the existence of intermediate good and the existence of a non-traded good sector in each country. We then apply the equation to estimate the global welfare impact of the worldwide reduction of international shipping costs in the last five decades.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: https://www.economicdynamics.org/meetpapers/2013/paper_1283.pdf
    Download Restriction: no

    Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 1283.

    as
    in new window

    Length:
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:red:sed013:1283
    Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
    Fax: 1-314-444-8731
    Web page: http://www.EconomicDynamics.org/society.htm
    Email:


    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.:

    as in new window
    1. David Hummels & Georg Schaur, 2012. "Time as a Trade Barrier," NBER Working Papers 17758, National Bureau of Economic Research, Inc.
    2. Ina Simonovska & Michael E. Waugh, 2014. "Trade Models, Trade Elasticities, and the Gains from Trade," NBER Working Papers 20495, National Bureau of Economic Research, Inc.
    3. Kei-Mu Yi, 2010. "Can Multistage Production Explain the Home Bias in Trade?," American Economic Review, American Economic Association, vol. 100(1), pages 364-93, March.
    4. Daniel Yi Xu, 2013. "Competition, Markups, and the Gains from International Trade," 2013 Meeting Papers 653, Society for Economic Dynamics.
    5. Chang-Tai Hsieh & Ralph Ossa, 2011. "A Global View of Productivity Growth in China," NBER Working Papers 16778, National Bureau of Economic Research, Inc.
    6. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," CER-ETH Economics working paper series 08/89, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    7. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage : A Quantitative Approach," Macroeconomics Working Papers 22071, East Asian Bureau of Economic Research.
    8. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
    9. Arnaud Costinot & Dave Donaldson & Ivana Komunjer, 2012. "What Goods Do Countries Trade? A Quantitative Exploration of Ricardo's Ideas," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 581-608.
    10. Costas Arkolakis, 2008. "Market Penetration Costs and the New Consumers Margin in International Trade," NBER Working Papers 14214, National Bureau of Economic Research, Inc.
    11. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
    12. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
    13. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
    14. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
    15. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
    16. Haichao Fan & Edwin L.-C. Lai & Han Steffan Qi, 2011. "A Model of Trade with Ricardian Comparative Advantage and Intra-sectoral Firm Heterogeneity," CESifo Working Paper Series 3634, CESifo Group Munich.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:red:sed013:1283. 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: (Christian Zimmermann)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.