Trade, Domestic Frictions, and Scale Effects

Ramondo, Natalia; Rodrı́guez-Clare, Andrés; Saborío-Rodríguez, Milagro

doi:10.1257/aer.20141449

Cited by 102 publications

(37 citation statements)

References 35 publications

(3 reference statements)

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“…Total factor productivity (TFP) is composed of two terms: an aggregate component (A i t ), which is common to all varieties in a country, and a variety-specific component (z i ) that is a stochastic realization from a Fréchet distribution. We allow technology levels to be endogenous and proportional to the size of the economy, that is A i t = φ i t L i t , as in Ramondo et al (2016). 13 Note that, although the elasticity of TFP with respect to population size is equal to one under this formulation, the elasticity of real income with respect to population is less than one because of the congestion effects in the presence of local fixed factors.…”

Section: Productionmentioning

confidence: 99%

Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement

Caliendo¹,

Opromolla²,

Parro³

et al. 2017

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The economic effects from labor market integration are crucially affected by the extent to which countries are open to trade. In this paper we build a multi-country dynamic general equi-librium model with trade in goods and labor mobility across countries to study and quantify the economic effects of trade and labor market integration. In our model trade is costly and features households of different skills and nationalities facing costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct migration flows by skill and na-tionality across 17 countries for the period 2002-2007. We then exploit the timing variation of the 2004 EU enlargement to estimate the elasticity of migration flows to labor mobility costs, and to identify the change in labor mobility costs associated to the actual change in policy. We apply our model and use these estimates, as well as the observed changes in tariffs, to quantify the effects from the EU enlargement. We find that new member state countries are the largest winners from the EU enlargement, and in particular unskilled labor. We find smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse off after the enlargement. We study even further the interaction effects between trade and migration policies and the role of different mechanisms in shaping our results. Our results highlight the importance of trade for the quantification of the welfare and migration effects from labor market integration.

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Section: Productionmentioning

confidence: 99%

Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement

Caliendo¹,

Opromolla²,

Parro³

et al. 2017

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show abstract

“…3 Similar to municipal mergers in many other countries, city-county mergers in China typically involve the integration of governments in different jurisdictions and thus potentially reduce jurisdictional barriers. Many find significant intra-national and inter-jurisdictional barriers that impede the mobility of factors and commodities in many countries (Agnosteva et al, 2014;Ramondo et al, 2016;Tombe and Winter, 2014;Wolf, 2000). 4 In a transition economy like China, jurisdictional barriers are becoming a relevant policy issue.…”

Section: Introductionmentioning

confidence: 99%

Do city–county mergers in China promote local economic development?

Wei

Hewings

2017

Econ Transit

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Municipal mergers have become a worldwide phenomenon in the past few decades, primarily advanced to exploit economies of scale. While most evaluations of municipal mergers have focused on the efficiency of local public goods provision, it is rare in the literature to explore how such mergers promote economic growth in a developing country context. This research investigates the economic consequences of a policy experiment of city-county mergers (che xian she qu) in China during the period 2000-2004. Using comprehensive datasets at city, county and firm levels, we present evidence that the merger significantly increases local economic development, and the magnitude of the effect depends on local endowments related to agglomeration forces. The results are robust to a number of different model specifications. We further verify that improved transport infrastructure and urban agglomeration economies after merger are potential contributors to the positive merger effects.JEL classifications: R1, R5, H11, O18.

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“…More generally, our paper is also related to the recent literature in international trade that explicitly models internal trade costs (Ramondo, Rodríguez-Clare and Saborío-Rodríguez 2016), or models space as a continuum (Allen and Arkolakis 2014). Ramondo et al (2016) are concerned with endogenous growth models and thus, they address a distinct set of questions. However, in their framework as in ours, it is key to move away from the crude assumption of zero internal trade costs.…”

mentioning

confidence: 99%

Estimating Border Effects: the Impact of Spatial Aggregation

Coughlin

Novy

2016

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Trade data are typically reported at the level of regions or countries and are therefore aggregates across space. In this paper, we investigate the sensitivity of standard gravity estimation to spatial aggregation. We build a model in which symmetric micro regions are aggregated into macro regions. We then apply the model to the large literature on border e¤ects in domestic and international trade. Our theory shows that aggregation leads to border e¤ect heterogeneity. Larger regions or countries are systematically associated with smaller border e¤ects. The reason is that due to spatial frictions, aggregation across space increases the cost of trading within borders. The cost of trading across borders therefore appears relatively smaller. We call this mechanism the spatial attenuation e¤ect. Even if no border frictions exist at the micro level, gravity estimation can still produce large border e¤ects. We test our theory with trade ‡ows at the level of U.S. states. Our results con…rm the model's predictions, with quantitatively strong heterogeneity patterns.JEL classi…cation: F10, F15, R12

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Trade, Domestic Frictions, and Scale Effects

Cited by 102 publications

References 35 publications

Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement

Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement

Do city–county mergers in China promote local economic development?

Estimating Border Effects: the Impact of Spatial Aggregation

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