Discussion Paper Details

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Title: Trade Theory with Numbers: Quantifying the Consequences of Globalization

Author(s): Arnaud Costinot and Andres Rodriguez-Clare

Publication Date: March 2013

Keyword(s): counterfactual analysis, globalization, gravity models, trade policy and welfare analysis

Programme Area(s): International Trade and Regional Economics

Abstract: We review a recent body of theoretical work that aims to put numbers on the consequences of globalization. A unifying theme of our survey is methodological. We rely on gravity models and demonstrate how they can be used for counterfactual analysis. We highlight how various economic considerations---market structure, firm-level heterogeneity, multiple sectors, intermediate goods, and multiple factors of production---affect the magnitude of the gains from trade liberalization. We conclude by discussing a number of outstanding issues in the literature as well as alternative approaches for quantifying the consequences of globalization.

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Bibliographic Reference

Costinot, A and Rodriguez-Clare, A. 2013. 'Trade Theory with Numbers: Quantifying the Consequences of Globalization'. London, Centre for Economic Policy Research.