Recent quantitative trade models treat import tariffs as pure cost shifters so that their effects are similar to iceberg trade costs. We introduce revenue-generating import tariffs, which act as demand shifters, into the framework of Arkolakis, Costinot and Rodriguez-Clare (2012), and generalize...

We derive exact conditions relating the distributions of firm productivity, sales, output, and markups to the form of demand in monopolistic competition. Applications include a new “CREMR” demand function (Constant Revenue Elasticity of Marginal Revenue): it is necessary and sufficient for...

We derive exact conditions relating the distributions of firm productivity, sales, output, and markups to the form of demand in monopolistic competition. Applications include a new “CREMR” demand function (Constant Revenue Elasticity of Marginal Revenue): it is necessary and sufficient for...

Convex vacancy creation costs shape firms' responses to trade liberalization. They induce capacity constraints by increasing firms' cost of production, leading a profit maximizing firm not to fully meet the increased foreign demand. Hence, firms will only serve a few export markets. More...

This paper presents a new model of oligopoly in general equilibrium and explores its implications for positive and normative aspects of international trade. Assuming “continuum-Pollak” preferences, the model allows for consistent aggregation over a continuum of sectors, in each of which a...

We provide an overview and synthesis of recent work on models of monopolistic competition with heterogeneous firms in international trade, paying particular attention to competition effects, pass-through, selection effects, and linking distributions of firm characteristics and outcomes. A...

Mexico experienced a tremendous expansion of its export-processing maquila sector during the 1990s. At the same time, a large proportion of its labor force remains employed in the informal sector. Since one of the main objectives of the maquiladora program was to increase formal employment, we...

We incorporate the now standard knowledge-capital model of multinational firms in a new economic geography setting. The theoretical predictions of our model suggest that unskilled labor mobility leads to less concentration of production than skilled labor mobility does. This is in line with...

We provide an overview and synthesis of recent work on models of monopolistic competition with heterogeneous firms in international trade, paying particular attention to competition effects, pass-through, selection effects, and linking distributions of firm characteristics and outcomes. A...

We analyse firms' sourcing decisions under institutional uncertainty in foreign countries. Firms can reduce their uncertainty by observing offshoring firms' behaviour. The model characterises a sequential offshoring equilibrium path, led by the most productive firms in the market. With multiple...