Using the methodology developed in Kehoe and Ruhl (2013), I measure the change in the extensive, or new goods, margin of trade between Austria and the ten new entrants to the European Union in 2004. On average, the new goods account for 56% of the bilateral trade flow after enlargement. A time series measure shows growth in the new goods margin coincides with the period surrounding the 2004 enl...

It is typically less profitable for an opportunistic borrower to divert inputs than to divert cash. Therefore, suppliers may lend more liberally than banks. This simple argument is at the core of our contract theoretic model of trade credit in competitive markets. The model implies that trade credit and bank credit can be either complements or substitutes. Among other things, the model explains...

We propose a decomposition of social welfare when consumers have quasi-linear utility functions under certain conditions satisfied in many models of imperfect competition. In our decomposition, social welfare is expressed as the sum of consumers’ gross utilities and trade surplus of non-numeraire commodities, which contribute to consumers’ utilities non-linearly. This decomposition is useful es...

We study the possibility of trade for purely informational reasons. We depart from previous analyses (e.g. Grossman and Stiglitz (1980) [22] and Milgrom and Stokey (1982) [32]) by allowing the final payoff of the asset being traded to depend on an action taken by its eventual owner. We characterize conditions under which equilibria with trade exist. © 2010 Elsevier Inc. All rights reserved. JEL...

How Outsourcing Affects Bilateral Political Relations One issue the literature neglects is how outsourcing stimulates trade (imports, exports and foreign direct investment), thereby affecting political relations. However, at least as far back as 1750, economic philosophers such as Baron de Montesquieu in his L’Esprit des Lois, argued, “peace is the natural effect of trade.” This paper first rev...

Rapid trade liberalisation can exert profound effects on labour markets. Domestic firms, to sustain competitiveness for survival, could react through cutting labour benefits to achieve cost reductions. Alternatively, trade liberalisation may alter the industry composition of firms changing the aggregate formality rates. This paper studies the relationship between trade liberalisation and inform...

In this paper we consider whether a movement towards freer international trade generates incentives for firms to merge and if so what forms of merger are most profitable. In a linear Cournot framework we show that a reduction in trade costs may, but will not necessarily, encourage mergers. Both market structure and the level to which trade costs fall are shown to play a decisive role. Domestic ...

This paper discusses critically the links between trade and competition policies, starting with the empirical literature which suggests that liberal trade policies and tight competition policy are, in a loosely defined sense, substitutes. Next, the underpinnings for the “substitution” hypothesis in a strategic environment, whereby trade liberalization may reduce the incentive to enforce anti-tr...

This paper uses the methodology developed in Kehoe and Ruhl (2013) to measure the change in the extensive, or new goods, margin of trade between Japan and China after China’s entry into the World Trade Organization in 2001. The new goods account for 15.9% of Japanese exports to China and 22% of Chinese exports to Japan after trade liberalization. For the case of Chinese exports to Japan, a time...

Trade in intermediate goods as one possible link between rising trade and foreign direct investment is examined. To explain growing intermediate goods trade, three hypotheses are brought forward: outsourcing, global sourcing and the increasing importance of MNE networks. These hypotheses are tested by employing a cross-section framework, which uses OECD input-output table data, and an analysis,...