Chile and Mexico experienced severe economic crises in the early 1980s. This paper analyzes four possible explanations for why Chile recovered much faster than did Mexico. Comparing data from the two countries allows us to rule out a monetarist explanation, an explanation based on falls in real...

Both Chile and Mexico experienced severe economic crises in the early 1980s, but Chile recovered much faster than did Mexico. Using growth accounting and a calibrated dynamic general equilibrium model, we conclude that the crucial determinant of this difference between the two countries was the...

This paper quantitatively tests the "new trade theory" based on product differen-tiation, increasing returns, and imperfect competition. We employ a standard model, which allows both changes in the distribution of income among industrialized coun-tries, emphasized by Helpman and Krugman (1985),...