What is the impact of movement towards free trade on output? Can this impact permanently affect output levels, and more importantly, will it have an impact on steady-state growth rates? This paper provides empirical evidence showing how countries have exhibited substantial increases in their...

We analyse the effects of trade liberalization on firms' decisions and profits, and on consumers' welfare, in a product differentiation model with countries of different size. Firms decide product specifications at the beginning of the game, in which autarky is followed by trade liberalization...

This paper presents a trade model with firm-level productivity differences and R&D-driven growth. Trade liberalization causes the least productive firms to exit but also slows the development of new products. The overall effect on productivity growth depends on the size of intertemporal...

This paper develops a model of trade and CO2 emissions with heterogenous firms, where firms make abatement investments and thereby have an impact on their level of emissions. The model shows that investments in abatements are positively related to firm productivity and firm exports. Emission...

This paper sheds light on the role of the impact of taxes on energy production versus tariffs on imported goods for trade, energy demand, and welfare. For this, we develop a structural Eaton-Kortum type general equilibrium model of international trade which includes an energy sector. We estimate...

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...

This paper reviews the recent theoretical literature on heterogeneous firms and trade, which emphasizes firm selection into international markets and reallocations of resources across firms. We discuss the empirical challenges that motivated this research and its relationship to traditional...

This Paper surveys the empirical literature on the economic geography of trade flows, factor prices, and the location of production. The discussion is structured around the empirical predictions of a canonical theoretical model. We review empirical evidence on the determinants of trade costs and...

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

We show that even in the absence of diminishing returns in production and technological spillovers, international trade leads to a stable world income distribution. This is because specialization and trade introduce de facto diminishing returns – countries that accumulate capital faster than...