We incorporate trade imbalances into a quantitative model of bilateral trade in manufactures, dividing the world into forty countries. Fitting the model to 2004 data on GDP and bilateral trade we calculate how relative wages, real wages, and welfare would differ in a counterfactual world with...

"Global trade fell 30 percent relative to GDP during the Great Recession of 2008-2009. Did this collapse result from factors impeding international transactions or did it simply reflect the greater severity of the recession in highly traded sectors? We answer this question with detailed...