Together at Last: Trade Costs, Demand Structure, and Welfare

J. Peter Neary and Monika Mrazova ()

No 694, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We show that relaxing the assumption of CES preferences in monopolistic competition has surprising implications when trade is restricted. Integrated and segmented markets behave differently, the latter typically exhibiting reciprocal dumping. Globalization and lower trade costs have different effects: the former reduces spending on all existing varieties, the latter switches spending from home to imported varieties; when demands are less convex than CES, globalization raises whereas lower trade costs reduce firm output. Finally,calibrating gains from trade is harder. Many more parameters are needed, while import demand elasticities typically overestimate the true elasticities, and so underestimate the gains from trade.

Keywords: Additively Separable Preference; CES Preference; Iceberg Trade Costs; Quantifying Gains from Trade; Super- and Subconvexity of Demand; Super- and Subconcavity of Utility (search for similar items in EconPapers)
JEL-codes: F12 F15 F17 (search for similar items in EconPapers)
Date: 2014-01-20
New Economics Papers: this item is included in nep-ger, nep-int and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:d7eae42d-b6b9-4f35-8a16-3c5828a0dbbc (text/html)

Related works:
Journal Article: Together at Last: Trade Costs, Demand Structure, and Welfare (2014)
Working Paper: Together at Last: Trade Costs, Demand Structure, and Welfare (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:694

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen ( this e-mail address is bad, please contact ).