Tradability, productivity, and understanding international economic integration
By: Paul R. Bergin, Reuven Glick.
Contributors: Glick, Reuven.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11637; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11637.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: International trade -- Mathematical models.; International economic integration -- Mathematical models.; Industrial productivity -- Mathematical models.; Costs, Industrial -- Mathematical models.; North America -- Commercial policy.; Europe -- Commercial policy.
Description: "This paper develops a two-country macro model with endogenous tradability to study features of international economic integration.  Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially along the extensive margin, price dispersion has not decreased and may even have increased.  We propose a way of reconciling these price and quantity observations in a macroeconomic model where the decision of heterogeneous firms to trade internationally is endogenous.  Trade is shaped both by the nature of heterogeneity--trade costs versus productivity--and by the nature of trade policies--cuts in fixed costs versus cuts in per unit costs like tariffs.  For example, in contrast to tariff cuts, trade policies that work mainly by lowering various fixed costs of trade may have large effects on entry decisions at the extensive margin without having direct effects on price-setting decisions.  Whether this entry raises or lowers overall price dispersion depends on the type of heterogeneity that distinguishes the new entrants from incumbent traders"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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