Starting with Romer [1987] and Rivera-Batiz-Romer [1991] economists have been able to model how trade enhances growth through the creation and import of new varieties. In this framework, international trade increases economic output through two channels. First, trade raises productivity levels...

This paper demonstrates theoretically that a financial shock can have very persistent effects on international trade. Motivation is taken from the aftermath of the dramatic trade collapse in 2008-9, which despite a substantial recovery, has left a persistently slower growth rate in trade. We...

Why did per capita income divergence occur so dramatically during the 19th century, rather than at the outset of the Industrial Revolution? How were some countries able to reverse this trend during the globalization of the late 20th century? To answer these questions, this paper develops a...

We examine the evolution of market potential and its role in driving economic growth over the long twentieth century. Theoretically, we exploit a structural gravity model to derive a closed-form solution for a widely-used measure of market potential. We are thus able to express market potential...

We study the distribution of economic activity, as proxied by lights at night, across 250,000 grid cells of average area 560 square kilometers. We first document that nearly half of the variation can be explained by a parsimonious set of physical geography attributes. A full set of country...

A widely held view is that openness to international trade leads to higher GDP volatility, as trade increases specialization and hence exposure to sector-specific shocks. We revisit the common wisdom and argue that when country-wide shocks are important, openness to international trade can lower...

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...

Trade in business services has been attracting attention from academic researchers, policy makers, and business journalists. While there are many anecdotes, there has been little in the way of formal theory applied to this issue. In this paper, we adapt a general model of fragmentation of...

World trade in services has recently been a little under $US2 trillion, about a quarter of world trade in goods. That ratio does not appear to have changed much in the last 50 years. For the US, exports of services have recently been over 40% and imports about 20% of exports and imports of...

This paper uses bilateral automobile export unit values from the United States, Germany and Japan to measure the importance of markup adjustment that is associated with exchange rate changes across export destination markets. Japanese auto export prices exhibit a high degree of markup adjustment...