DP12788 The US Gains From Trade: Valuation Using the Demand for Foreign Factor Services

Author(s): Arnaud Costinot, Andres Rodriguez-Clare
Publication Date: March 2018
Programme Areas: International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12788

About 8 cents out of every dollar spent in the United States is spent on imports. What if, because of a wall or some other extreme policy intervention, imports were to remain on the other side of the US border? How much would US consumers be willing to pay to prevent this hypothetical policy change from taking place? The answer to this question represents the welfare cost from autarky or, equivalently, the welfare gains from trade. In this article, we discuss how to evaluate these gains using the demand for foreign factor services. The estimates of gains from trade for the US economy that we review range from 2 to 8 percent of GDP.