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The margins of trade

Author: Jonathan Eaton; Ana Cecilia Lima-Fieler; National Bureau of Economic Research,
Publisher: Cambridge, Mass. : National Bureau of Economic Research, 2019.
Series: Working paper series (National Bureau of Economic Research), no. 26124.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
We introduce quality differentiation and an extensive margin of products into a standard quantitative, general equilibrium model of international trade. Both the quality and the quantity of a product play a role in its contribution both to consumption and to production. The framework allows bilateral trade to vary at the extensive and intensive margins and the intensive margin of trade to vary at the quantity and  Read more...
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Details

Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: Jonathan Eaton; Ana Cecilia Lima-Fieler; National Bureau of Economic Research,
OCLC Number: 1111735378
Notes: "July 2019"
Includes online appendix (pages 48-62).
Description: 1 online resource (45 pages) : illustrations.
Series Title: Working paper series (National Bureau of Economic Research), no. 26124.
Responsibility: Jonathan Eaton, Ana Cec̕ília Fieler.

Abstract:

We introduce quality differentiation and an extensive margin of products into a standard quantitative, general equilibrium model of international trade. Both the quality and the quantity of a product play a role in its contribution both to consumption and to production. The framework allows bilateral trade to vary at the extensive and intensive margins and the intensive margin of trade to vary at the quantity and unit-value margins. We estimate the parameters of the model using bilateral data on trade flows and on unit values in trade. The model captures (i) the well-documented increasing relation between unit values and both importer and exporter per capita income and (ii) how the extensive margin rises with importer and exporter size. But, unlike other contributions to the literature confronting these margins in international trade, our framework delivers a standard gravity formulation for trade flows and standard measures of the gains from trade apply.

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