We analyze recent contributions to growth theory based on the model of expanding variety of Romer (1990). In the first part, we present different versions of the benchmark linear model with imperfect competition. These include the “labequipment” model, “labor-for-intermediates” and “directed technical change”. We review applications of the expanding variety framework to the analysis of internat...

Previous analyses of free trade areas suggest that member countries reduce external tariffs to the level that improves welfare of non-member countries. Using an oligopoly model with product differentiation, this paper shows that when a free trade area entails endogenous change from segmented to integrated markets for internally produced goods, external tariffs become strategic complements and t...

This study tests the importance of Ricardian technology differences for international trade. The empirical analysis has three comparative advantages: including emerging and advanced economies, isolating panel variation regarding the link between productivity and exports, and exploiting heterogeneous technology diffusion from immigrant communities in the United States for identification. The lat...

To analyze the effects on prices of simultaneous tariff reductions by multiple importing countries, we construct a simple three-country model where a good is produced by a monopolist with non-constant marginal cost and imported by two countries. We specifically compare two representative tariff-reduction formulas: the "fixed-amount" and the "uniform percentage" reductions. The uniform percentag...

We consider a two-country model of wage determination with private information in unionized, imperfectly competitive, industries. We investigate the effects of opening up markets to trade as well as of further market integration on the negotiated wage and the maximum delay in reaching an agreement. From an initial situation of two-way intraindustry trade, an increase in product market integrati...

Pre-tax car prices are particularly low in EU countries with high registration taxes but no car production, meaning that the tax is equivalent to an import tariff and induces international price discrimination. The paper develops a theorectical model to analyse the European Commission's policy of facilitating arbitrage and thereby reducing car price differences. The effects on prices, quantitie...

This paper characterizes the integration patterns of international currency unions (such as the CFA Franc zone). We empirically explore different features of currency unions, and compare them to countries with sovereign monies by examining the criteria for Mundell’s concept of an optimum currency area. We find that members of currency unions are more integrated than countries with their own cur...

Economic Integration, Market Power and Technological Change We examine a common market which expands by integrating new regions. Capitalists are strategically interdependent through the goods market and they improve their productivity through R&D. Production and R&D employ unionized workers. The purpose of integration is to maximize a weighed average of workers’ and capitalists’ utilities. The ...

Much trade liberalization involves large and small countries. This paper presents a formal comparison of the economic welfare effects for the small and large country from unilateral free trade by the small country, from a free trade agreement, and from preferential access to the large country’s market. I show that it matters for the welfare effects of these strategies whether the small country ...

We evaluate two alternative models of international trade in differentiated products. An increasing returns model where varieties are linked to firms predicts home market effects: increases in a country’s share of demand cause disproportionate increases in its share of output. In contrast, a constant returns model with national product differentiation predicts a less than proportionate increase...