We use the HOSV model of trade to find out a link between corruption and the pattern of trade, not just its effect on the volume of trade. We prove that greater corruption in labor-abundant countries will restrict the volume of world trade while corrupt capital-abundant countries promote trade. This is caused by intermediaries who are engaged in mitigating the transaction cost of corruption. Re...

The Dodd-Frank Wall Street Reform Act calls for extensive rule-making for financial regulation, the details of which are left up to the relevant enforcement agencies. To help ensure that this wide discretion is not abused, regulators should be required to use Benefit-Cost Analysis (BCA). While BCA has been used extensively and increasingly in in environmental, health and safety regulation (EHS)...

The incidence of bilateral trade costs is calculated here using neglected properties of the structural gravity model, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada’s provinces, 19922003, sellers’ incidence is on average some five times higher than buyers’ incidence. Sellers’ incidence falls over time due to specialization, despite ...

This paper develops a view of exchange rate policy as a trade-off between the desire to smooth fluctuations in real exchange rates so as to reduce distortions in consumption allocations, and the need to allow flexibility in the nominal exchange rate so as to facilitate terms of trade adjustment. We show that optimal nominal exchange rate volatility will reflect these competing objectives. The k...

When unemployment arises, a country often imposes an import tariff since it supposedly expands the market share of domestic firms and encourages them to hire more workers. However, such a policy improves the current account and hence appreciates the home currency. Consequently, home products lose competitiveness against foreign products and eventually employment decreases, contrary to the prior...

This paper uses a monopolistic competitive framework with many sectors to study the impact of trade liberalization on local and global emissions. We focus on the interplay of the pollution haven effect and the home market effect and show how a large-market advantage can counterbalance a high emission tax, implying that trade liberalization leads to lower global emissions. Generally, our results...

This paper proposes a new theoretical framework for studying the patterns of trade between rich and poor countries by incorporating nonhomothetic preferences into the standard home market effect models of trade. It has a continuum of Dixit-Stiglitz monopolistic competitive sectors with iceberg trade costs. There are two countries, which may differ in their per capita labor endowment and the pop...

The price-wedge method yields a tariff-equivalent estimate of technical barriers to trade (TBT). An extension of this method accounts for imperfect substitution between domestic and imported goods and incorporates recent findings on trade costs. We explore the sensitivity of this revamped tariff equivalent estimate to its determinants (substitution elasticity, preference for home good, trade co...