This paper evaluates the research that has taken place on intra-industry trade (IIT) since the publication of Grubel and Lloyd’s pioneering volume on the subject in 1975. The evaluation of the development of the literature is organised around the themes of measurement, explanation and policy. The paper identifies significant progress on all these themes. We now have a robust theoretical framewo...

Case study evidence suggests that exporting firms learn from their clients. But econometric evidence, mostly using exporting and TFP growth, is mixed. We use a UK panel data set with firm-level information on exporting and productivity. Our innovation is that we also have direct data on the sources of learning (in this case about new technologies). Controlling for fixed effects we have two main...

Traditional computable general equilibrium (CGE) models based on the Armington assumption fail to capture the extensive margin of trade, and thereby underestimate the trade and welfare effects of trade opening. To address this problem, this paper introduces the Melitz (2003) theoretical framework with firm heterogeneity and fixed exporting costs into a global CGE model. Some illustrative simula...

This paper provides empirical evidence for the interaction between firm-level total factor productivity and trade liberalization as key determinants of firm-level job destruction caused by trade. We also test some key theoretical predictions from Melitz (2003), whose model is used to derive an explicit equation relating firm productivity and trade-induced labor layoff when a country liberalizes...

This paper introduces a framework to study the links between the supply of liquid assets for the financial market and the international allocation of economic activity. Private assets’ liquidity properties—their usefulness as collateral or media of exchange in financial transactions— affect assets’ values and interest rates, with consequences on firm entry, production, aggregate productivity, a...

Recent models of international trade have identified product quality as an important determinant of bilateral trade flows. Yet relatively little is understood about the relationship between the characteristics of the export market and the quality of products. In this paper we examine this link using Chinese data. We find evidence that product unit values vary with standard gravity variables in ...

Article history: Received 3 March 2009 Received in revised form 14 July 2009 Accepted 3 September 2009 Available online 14 October 2009 Tariffs and anti-dumping duties are two important tools used to protect industries from foreign competition and to generate revenue. While the two tools have been studied extensively in separate contexts, little is known about their comparative effects. This pa...

We derive a simple equation for the welfare gains from trade when tariffs are liberalized or iceberg trade costs fall. Covering various one-sector trade models that may or may not feature extensive margins and imperfect competition, we generalize the analysis of Arkolakis, Costinot and Rodriguez-Clare (2012) to encompass revenue-generating import tariffs. Our formula permits easy quantification...

This paper develops a model of FDI with reverse imports examining the impact of FDI on the home economy through the “hollowing out” effect on the domestic employment. A foreign wage threshold exists. If the foreign wage is lower than the threshold, the home firm chooses FDI. The threshold depends on a FDI fixed cost and a demand parameter. A welfare analysis shows that another foreign wage thre...

In this paper, we first present a simple theoretical model of globalization between similar countries to motivate the empirical work that follows. Specifically, we examine the linkages between trade volumes and relative wages in a specialization model along the lines of Ethier (1982). The core of the empirical analysis involves bivariate time-series analysis. There we find some evidence of a re...