This paper provides a new heterogeneous firm model for trade where firms differ in their productivity and experience different market demand shocks. The model incorporates variations in trade policy, trade preferences, and the rules of origin needed to obtain them, to reflect real world...

This paper derives a portfolio diversification rationale for a trade policy regime that insures returns to nondiversifiable human capital investment. In the absence of complete insurance markets for human capital, the decentralized equilibrium is characterized by excessive specialization. The...

For two decades, the consensus explanation of the British Industrial Revolution has placed technological change and the supply side at center stage, affording little or no role for demand or overseas trade. Recently, alternative explanations have placed an emphasis on the importance of trade...

Most empirical policy work requires the aggregation of policies. Trade policy aggregation exemplifies the aggregation problem poignantly, with thousands of highly dispersed trade barriers. This paper provides methods of policy aggregation that are consistent with two common objectives of...

Data for OECD countries document: 1. imports and exports are about three times as volatile as GDP; 2. imports and exports are pro-cyclical, and positively correlated with each other; 3. net exports are counter-cyclical. Standard models fail to replicate the behavior of imports and exports,...

A primary function of trade policy is to restrict imports to benefit the targeted domestic sector. However, a well-established theoretical literature highlights that the form of trade policy (e.g., quotas versus tariffs) can have a significant impact on how much trade policy affects firms'...

In this paper we explore the effect of trade policy on productivity and welfare in the now standard model of firm-level heterogeneity and product differentiation with monopolistic competition. To obtain sharp results, we restrict attention to an economy that takes as given the price of imports...

We study a simple, tractable model of labor adjustment in a trade model that allows us to analyze the economy's dynamic response to trade liberalization. Since it is a neoclassical market-clearing model, we can use duality techniques to study the equilibrium, and despite its simplicity a rich...

We construct a dynamic, stochastic rational expectations model of labor reallocation within a trade model that is designed so that its key parameters can be estimated for trade policy analysis. A key feature is the presence of time-varying idiosyncratic moving costs faced by workers. As a...

We illuminate the relationship between optimal firm pricing and optimal trade policy by exploring a generalized model that accommodates product differentiation at both the national and sub-national (firm) levels. We assume monopolistic competition in the differentiated products at the...