Welfare in models of trade with heterogeneous firms

I illustrate that the welfare improvement property of the Melitz model is due to the shape of the aggregate labor demand curve, which slopes upwards. By slightly changing some assumptions in the model, this curve may have a negative slope. In this case, increases in aggregate productivity result in a reduction in welfare. For example, this may occur when fixed costs are measured in units of aggregate output instead of labor.JEL codes: F12, F16, J23.

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Year of publication:	2008
Authors:	Janiak, Alexandre
Institutions:	Centro de Economía Aplicada, Universidad de Chile

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Extent:	application/pdf
Series:	Documentos de Trabajo.
Type of publication:	Book / Working Paper
Notes:	Number 253
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005101667