This paper shows that the results of Venables (1987) depend critically on the assumption that there are no fixed costs of trade. The introduction of fixed costs of exporting, while making the model more consistent with the empirical evidence, leads to the opposite conclusion that technological...

This paper provides a new heterogeneous firm model for trade where firms differ in their productivity and experience different market demand shocks. The model incorporates variations in trade policy, trade preferences, and the rules of origin needed to obtain them, to reflect real world...

We study unilateral trade liberalization in the extended model of Melitz and Ottaviano (2008). First, we show that the effect of falling per unit trade costs depends on the use of the "outside good" assumption: in its presence, trade liberalization reduces welfare at Home, and raises it...