IDEAS home Printed from https://ideas.repec.org/p/ste/nystbu/14-11.html

Trade Adjustment Dynamics and the Welfare Gains from Trade

Author

Listed:
  • George Alessandria
  • Horag Choi
  • Kim Ruhl

Abstract

We introduce time and risk into the fixed-variable cost tradeoff in heterogeneous firm trade models: Investing in exporting gradually and stochastically lowers the costs of exporting. In the model, aggregate trade dynamics arise from producer-level decisions to invest in lowering their future variable export costs, and tariff reforms generate time-varying trade elasticities. The gains from reducing tariffs arise from substituting away from firm creation and towards exporting. This substitution is larger when new exporters are smaller and take longer to grow into successful exporters. The welfare gains from reducing tariffs are much larger than the long-run changes in consumption and the welfare gains cannot be recovered from a static model or from formulas based on those models. Comparing steady-state outcomes can predict a welfare loss from reform when the actual change is positive.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • George Alessandria & Horag Choi & Kim Ruhl, 2014. "Trade Adjustment Dynamics and the Welfare Gains from Trade," Working Papers 14-11, New York University, Leonard N. Stern School of Business, Department of Economics.
    • Handle: RePEc:ste:nystbu:14-11
    as

    Download full text from publisher

    File URL: http://w4.stern.nyu.edu/economics/docs/workingpapers/2014/Ruhl_TradeAdjDynamics_Apr2014.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F6 - International Economics - - Economic Impacts of Globalization

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ste:nystbu:14-11. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Amanda Murphy The email address of this maintainer does not seem to be valid anymore. Please ask Amanda Murphy to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/ednyuus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.