DP9398 Trade Theory with Numbers: Quantifying the Consequences of Globalization
Author(s): | Arnaud Costinot, Andres Rodriguez-Clare |
Publication Date: | March 2013 |
Keyword(s): | counterfactual analysis, globalization, gravity models, trade policy, welfare analysis |
JEL(s): | F11, F12, F13, F15, F17, F60, F62 |
Programme Areas: | International Trade and Regional Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=9398 |
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.