This paper is concerned with the reasons why some currencies, such as the pound sterling and the U.S. dollar, have come to serve as "vehicles" for exchanges of other currencies. It develops a three-country model of payments equilibrium with transaction costs, and shows how one currency can...

We show in a multi-sector, heterogeneous-firm trade model that the effect of tariffs on entry, especially in the presence of production linkages, can reverse the traditional positive optimal tariff argument. We then use a new tariff dataset, and apply it to a 189-country, 15-sector version of...

The actual value added tax systems used in many countries differ significantly from the completely general VAT that has been the focus of most economic analyses. In practice, VAT systems exempt broad classes of consumer goods and services. This has important implications for the effect of the...

This paper explores the relationship between exchange rate pass-through and market share for monopolistically competitive exporters. Under fairly general assumptions we show that pass-through should be high for exporters based in a country with a very large share of total destination market...

We argue that trade in intermediate inputs, or 'global production sharing,' is a potentially important explanation for the increase in the wage gap between skilled and unskilled workers in the U.S. and elsewhere. Using a simple model of heterogeneous activities within an industry, we show that...

Since the early 1980s, the U.S. economy has experienced a growing wage differential: high-skilled workers have claimed an increasing share of available income, while low-skilled workers have seen an absolute decline in real wages. How and why this disparity has arisen is a matter of ongoing...