A reduction in income tax rates generates substantial dynamic responses within the framework of the standard neoclassical growth model. The short-run revenue loss after an income tax cut is partly - or, depending on parameter values, even completely - offset by growth in the long-run, due to the...

This paper presents a model of international trade that features heterogeneous firms, relativeendowment differences across countries, and consumer taste for variety. The paper demonstrates thatfirm reactions to trade liberalization generate endogenous Ricardian productivity responses at...

This paper analyses patterns of production across 14 industries in 45 regions from 7 European countries since 1975. We estimate a structural equation derived directly from Heckscher-Ohlin theory that relates an industry's share of a region's GDP to factor endowments and relative prices. Factor...

This paper examines the role of international trade in the reallocation of U.S. manufacturing activity within and across industries from 1977 to 1997. It introduces a new measure of industry exposure to international trade, motivated by the Heckscher-Ohlin model, which focuses on where imports...

We present a dynamic comparative advantage model in which moderate reductions in trade costs can generate sizable increases in trade volumes over time. A fall in trade costs has two effects on the volume of trade. First, for given factor endowments, it raises the degree of specialization of...

This paper extends a recent class of quantitative models of international trade to incorporate factor mobility within countries. We present a model-based decomposition of the variance of economic activity into the contributions of locational fundamentals, market access and their covariance. We...

We draw attention to the role of economic geography in explaining important cross-sectional facts which are difficult to account for in existing models of industrialization. By construction, closed-economy models that stress the role of local demand in generating sufficient expenditure on...

Although economists have long been aware of Jensen's inequality, many econometric applications have neglected an important implication of it: the standard practice of interpreting the parameters of log-linearized models estimated by ordinary least squares as elasticities can be highly misleading...

This paper derives a micro-founded gravity equation in general equilibrium based on a translog demand system that allows for endogenous markups and substitution patterns across goods. In contrast to standard CES-based gravity equations, trade is more sensitive to trade costs if the exporting...

Relative wages vary considerably across regions of the United Kingdom, with skill-abundantregions exhibiting lower skill premia than skill-scarce regions. This paper shows that thelocation of economic activity is correlated with the variation in relative wages. U.K. regionswith low skill premia...