Trade Liberalization with Heterogenous Firms
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NBER Working Paper No. 12192
Issued in May 2006
NBER Program(s): ITI
This paper examines the impact of trade liberalization with heterogeneous firms using the Melitz (2003) model. We find a number of novel results and effects including a Stolper-Samuelson like result and several results related to the volume of trade, which are empirically testable. We also find what might be called an anti-variety effect as the result of trade liberalization. This resonates with the often voiced criticism from antiglobalists that globalization leads the world to become more homogenous by eliminating local specialities. Nevertheless, we find that trade liberalization always leads to welfare gains in the model.
Published: Richard E. Baldwin & Rikard Forslid, 2010.
"Trade Liberalization with Heterogeneous Firms,"
Review of Development Economics,
Blackwell Publishing, vol. 14(2), pages 161-176, 05.
This paper is available as PDF (267 K) or via email.
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