Trade Liberalization with Heterogeneous Firms

This paper examines the various aspects of trade liberalization with heterogeneous firms using the Melitz (2003) model. We find a number of novel results and effects including a Stolper–Samuelson‐like result and several results related to the volume of trade, which are empirically testable. We also...

Full description

Saved in:
Bibliographic Details
Published in:Review of development economics 2010-05, Vol.14 (2), p.161-176
Main Authors: Baldwin, Richard E., Forslid, Rikard
Format: Article
Language:English
Subjects:
Business and economics
Development economics
Economics
Ekonomi
Globalization
Nationalekonomi
SAMHÄLLSVETENSKAP
Scandals
SOCIAL SCIENCES
Studies
Trade liberalization
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper examines the various aspects of trade liberalization with heterogeneous firms using the Melitz (2003) model. We find a number of novel results and effects including a Stolper–Samuelson‐like result and several results related to the volume of trade, which are empirically testable. We also analyze what might be called an anti‐variety effect as the result of trade liberalization. We show that this effect is most pronounced for small countries. This resonates with the often voiced criticism from antiglobalists that globalization leads the world to become more homogeneous by eliminating local specialties. Nevertheless, we find that trade liberalization always leads to welfare gains in the model.
ISSN:1363-6669
1467-9361
1467-9361
DOI:10.1111/j.1467-9361.2010.00545.x