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Cited by 1,707Global trade and economicsGlobal Trade and CompetitivenessEconomic Growth and Productivity

New Trade Models, Same Old Gains?

Open access
Arkolakis, Costas, Costinot, Arnaud, Rodríguez-Clare, Andrés·2012·American Economic Review
DOI 10.1257/aer.102.1.94
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Abstract

Micro-level data have had a profound influence on research in international trade over the last ten years. In many regards, this research agenda has been very successful. New stylized facts have been uncovered and new trade models have been developed to explain these facts. In this paper we investigate to what extent answers to new micro-level questions have affected answers to an old and central question in the field: how large are the welfare gains from trade? A crude summary of our results is: “So far, not much.” (JEL F11, F12)

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Cites

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  • Output and expenditure weights are theory-consistent size variables from the structural gravity system.

    “we use values for gross output and gross expenditures: these are theory-consistent size variables from the structural gravity system (Arkolakis et al., 2012)”

    From Estimating the effects of trade agreements: Lessons from 60 years of methods and data (2024) · cites this paper as Arkolakis et al., 2012

    Section 2 (pp. 7, 9) defines total expenditure and describes gravity as a decomposition of bilateral imports. An Introduction footnote (p. 4) uses gross output rather than GDP so import ratios can be interpreted as shares of gross total expenditure. These passages support the relevance of expenditure and gross output, but do not establish that both are theory-consistent size weights in a structural gravity system. (LLM, conf=0.83)

    Experimental — accuracy not yet measured

  • All theoretical gravity models and corresponding CGE analysis include domestic trade flows.

    “Even though all theoretical gravity models (e.g., Anderson, 1979;Anderson & van Wincoop, 2003;Arkolakis et al., 2012;Eaton & Kortum, 2002) and corresponding CGE analysis include domestic trade flows, the benefits of using theory-consistent domestic trade flows in estimating gravity models were recognised only more recently.”

    From Estimating the effects of trade agreements: Lessons from 60 years of methods and data (2024) · cites this paper as Arkolakis et al., 2012

    Section 2 (p. 7) defines total expenditure as a sum over all source countries, including the destination country, and the Introduction (p. 3) explicitly uses the share of expenditure on domestic goods in its gravity-model analysis. But the paper limits its analysis to a particular class of models; it does not establish that all theoretical gravity models or corresponding CGE analyses include domestic trade flows. (LLM, conf=0.86)

    Experimental — accuracy not yet measured

  • The estimating equation can be derived from alternative theoretical micro-foundations and is consistent with the theoretical framework used for the counterfactual analysis.

    “The estimating equation given in Equation (1) can be derived from alternative theoretical micro-foundations, compare, Anderson (2011), Arkolakis et al. (2012), Costinot and Rodríguez-Clare (2014), Head and Mayer (2014), Yotov et al. (2016), and, most importantly, is consistent with the theoretical framework used for our counterfactual analysis.”

    From Quantifying the partial and general equilibrium effects of sanctions on Russia (2024) · cites this paper as Arkolakis et al. (2012)

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Cites

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Research works printed but not linked: 23

  1. Alvarez, Fernando and Robert E. Lucas. 2007. General Equilibrium Analysis of the EatonKortum Model of International Trade. Journal of Monetary Economics 54(6):1726 1768.
  2. Anderson, James E. 1979. A Theoretical Foundation for the Gravity Equation. The American Economic Review 69(1):106 116.
  3. Anderson, James E. and Eric Van Wincoop. 2003. Gravity with Gravitas: A Solution to the Border Puzzle. The American Economic Review 93(1):170 192.
  4. Anderson, James E. and Eric Van Wincoop. 2004. Trade Costs. Journal of Economic Literature 42(3):691 751.
  5. Antras, Pol and Elhanan Helpman. 2004. 2004. Journal of Political Economy 112(3):552 580.
  6. Arkolakis, Costas, Svetlana Demidova, Peter J Klenow and Andres Rodr guez-Clare. 2008. Endogenous Variety and the Gains from Trade. American Economic Review, Papers and Proceedings 98(4):444 450.
  7. Bernard, Andrew B., Stephen J. Redding and Peter Schott. 2007. Comparative Advantage and Heterogeneous Firms. Review of Economic Studies 74(1):31 66.
  8. Broda, Cristian and David Weinstein. 2006. Globalization and the Gains from Variety. Quarterly Journal of Economics 121(2):541 585.
  9. Chaney, Thomas. 2008. Distorted Gravity: The Intensive and Extensive Margins of International Trade. The American Economic Review 98(4):1707 1721.
  10. Chetty, Raj. 2009. Su¢ cient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods. Annual Review of Economics 1:451 488.
  11. Eaton, Jonathan and Samuel Kortum. 2002. Technology, Geography and Trade. Econometrica 70(5):1741 1779.
  12. Feenstra, Robert. 1994. New Product Varieties and the Measurement of International Prices. The American Economic Review 84(1):157 177.
  13. Feenstra, Robert and Hiau Looi Kee. 2008. Export Variety and Country Productivity: Estimating the Monopolistic Competition Model with Endogenous Productivity. Journal of International Economics 74(2):500 518.
  14. Frankel, Je/rey A. and David Romer. 1999. Does Trade Cause Growth. The American Economic Review 89(3):379 399.
  15. Ghironi, F. and M.J. Melitz. 2005. International Trade and Macroeconomic Dynamics with Heterogeneous Firms. Quarterly Journal of Economics 120(3):865 915.
  16. Goldberg, P., A. Khandelwal, Nina Pavcnik and P. Topalova. 2009. Trade Liberalization and New Imported Inputs. American Economic Review, Papers and Proceedings 99(2):494 500.
  17. Grossman, Gene and Elhanan Helpman. 1991. Innovation and Growth in the Global Economy . Cambridge, Massachussets: MIT press.
  18. Krugman, Paul. 1980. Scale Economies, Product Di/erentiation, and the Pattern of Trade. The American Economic Review 70(5):950 959.
  19. Matsuyama, Kiminori. 2007. Ricardian Trade Theory. In The New Palgrave Dictionary of Economics , ed. L. Blume and S. Durlauf. 2nd edition ed. Basingstoke Hampshire: Palgrave Macmillan.
  20. Melitz, Marc J. 2003. The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica 71(6):1695 1725.
  21. Melitz, Marc J. and Gianmarco I. P. Ottaviano. 2008. Market Size, Trade, and Productivity. The Review of Economic Studies 75(1):295 316.
  22. Norihiko, Yamano and Nadim Ahmad. 2006. The OECD Input-Output Database: 2006 Edition. Working Paper 2006/8, OECD .
  23. Verhoogen, Eric. 2008. Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector. Quarterly Journal of Economics 123(2):489 530.

Cited by

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Authors
Arkolakis, C., Costinot, A., & Rodríguez-Clare, A.
Affiliations
  • National Bureau of Economic Research (US)
  • Massachusetts Institute of Technology (US)
  • University of California, Berkeley, and NBER, Department of Economics, 508-1 Evans Hall 3880, Berkeley, CA 94720-3880.
ORCID
Arkolakis, Costas
Venue
American Economic Review
Publisher
American Economic Association
Published
2012-02-01
Volume
102
Issue
1
Pages
94-130
ISSN
0002-8282 (ISSN-L)
DOI
10.1257/aer.102.1.94
OpenAlex
W2152065848
Cited by
1,707
References
5
Citations by year
2026: 85 · 2025: 113 · 2024: 114 · 2023: 116 · 2022: 124 · 2021: 139 · 2020: 143 · 2019: 138 · 2018: 111 · 2017: 116 · 2016: 112 · 2015: 110 · 2014: 100 · 2013: 82 · 2012: 52
FWCI
261.41
Type
journal article
Language
en
Open access
Licence
cc-by-nc-sa
Locations
  • American Economic Review (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • DSpace@MIT (Massachusetts Institute of Technology) (submittedVersion, cc-by-nc-sa)
Topics
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Global Trade and Competitiveness
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
Keywords
trade models, welfare gains from trade, stylized facts, trade theory, trade liberalization

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