In our European Economic Review (2002) paper, we used pre-1998 data on countries participating in and leaving currency unions to estimate the effect of currency unions on trade using (then-) conventional gravity models. In this paper, we use a variety of empirical gravity models to estimate the...

The Melitz model highlights the importance of the extensive margin (the number of firms exporting) for trade flows. Using the World Bank's Exporter Dynamics Database (EDD) featuring firm-level exports from 50 countries, we find that around 50% of variation in exports is along the extensive...

One of the most successful empirical relationships in international trade is the gravity equation, which relates bilateral trade flows between an origin and destination to bilateral trade frictions, origin characteristics, and destination characteristics. A key decision for researchers in...

We investigate the relationship between GDP per capita, trade costs, demand, and income inequality between 1996 and 2011. Specifically we apply the aggregate AIDS-based gravity model as developed in Fajgelbaum and Khandelwal (2016) to a panel of 40 countries to generate a new measure of market...

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...

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...

We present a general equilibrium model of the decisions of firms to innovate and to engage in international trade. We use the model to analyze the impact of a reduction in international trade costs on firms' process and product innovative activity. We first show analytically that if all firms...