Deconstructing the Gains from Trade: Selection of Industries vs. Reallocation of Workers

Bolatto, Stefano; Sbracia, Massimo

doi:10.2139/ssrn.2731692

Cited by 18 publications

(2 citation statements)

References 116 publications

(41 reference statements)

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“…where d ni;k > 1 is the iceberg cost (consisting of transport costs, tari¤s and other trade barriers) incurred by source i when shipping one unit of goods to destination country n. These costs are allowed to di¤er by destination, by source and even by sector. 9 As usual,…”

Section: Theoretical Framework 21 the Basic Environmentmentioning

confidence: 99%

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Trade Across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities

Bolatto

2013

SSRN Journal

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Multi-sector versions of the international trade model of Eaton and Kortum (2002) usually restrict trade elasticities to be identical across sectors, with potentially distorting e¤ects on the estimates of the model parameters. This paper allows for heterogeneous sectoral trade elasticities and quanti…es them by estimating an equation for bilateral market shares, with tari¤s and standard gravity variables used to model trade barriers. Results show that sectors di¤er signi…cantly in the size of trade elasticities. The paper proves that this heterogeneity matters at least in three di¤erent respects. First, it matters when inferring measures of relative productivity from trade and production data. Secondly, it matters when considering the trade-induced reallocations of production within and between sectors. When assessing their relative contribution to the productivity gains that each country obtains from opening to trade, gains turn out to be largely due to the reallocation within sectors, especially for richer countries. Finally, accounting for the heterogeneity in elasticities is crucial when running general equilibrium counterfactual studies, such as that performed in this paper, which assesses the e¤ects on aggregate of sector-speci…c technology shocks.

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Section: Theoretical Framework 21 the Basic Environmentmentioning

confidence: 99%

“…9 In this model, value-added shares s ik reveal country i's specialization pattern to the extent that they di¤er from the corresponding expenditure shares, namely k . In particular, the ratio s ik = k can be used as a proxy of a proper specialization index.…”

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Trade Across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities

Bolatto

2013

SSRN Journal

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Optimal Inflation Weights in the Euro Area

2016

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This study investigates the appropriate measure of inflation in the euro area that the central bank should adopt in order to minimize social welfare losses stemming from volatility in the output gap, inflation and relative prices. We use a model that accounts for both the heterogeneity observed in the degree of price rigidity across regions and sectors, and the asymmetry of real disturbances in relative prices. Our work shows that the optimal weights to assign to each region or economic sector depend on complex interactions between the degree of price stickiness, a country's economic size and the distribution of shocks across regions. Moreover, the optimal system of weights is primarily affected by the distribution of real shocks across countries. It follows that there is no simple rule of thumb for establishing the optimal weights for each region or economic sector.

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Carry Trades and Exchange Rate Volatility: A TVAR Approach

Anzuini

Brusa

2016

SSRN Journal

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Recent empirical studies have established that deviations from the Uncovered Interest Parity (UIP) condition may be different across macroeconomic regimes. We extend this work to account for possible nonlinearities and endogeneity by estimating a Threshold Vector Autoregression (TVAR) model. Using carry trade proxies as in Brunnermeier et al. (2009) alongside a measure of realized exchange rate volatility, we endogenously identify two volatility regimes: low and high. Simulating an incentive to open a carry-trade position through an orthogonal shock to the interest rate differential, we find that carry trade performance varies across different regimes. This suggests that UIP deviations are more pronounced in the low volatility state and non-linearities play a role in explaining the forward bias.

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Deconstructing the Gains from Trade: Selection of Industries vs. Reallocation of Workers

Cited by 18 publications

References 116 publications

Trade Across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities

Trade Across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities

Optimal Inflation Weights in the Euro Area

Carry Trades and Exchange Rate Volatility: A TVAR Approach

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