Lesotho and other least developed African countries responded impressively to the preferences they were granted under the African Growth and Opportunities Act with a rapid increase in their clothing exports to the US. But this performance has not been accompanied by some of the more dynamic...

This paper builds a tractable partial equilibrium model in the spirit of Melitz (2003), which incorporates two dimensions of heterogeneity: firms specific productivity shocks and firm-market specific demand shocks. The structural parameters of interest are estimated using only cross-sectional...

We argue that social capital as proxied by regional trust and the Rule of Law can improve aggregate productivity through facilitating greater firm decentralization. We collect original data on the decentralization of investment, hiring, production and sales decisions from Corporate Head Quarters...

We model the effects of consumption-type taxes which differ according to the base and location of the tax. Our model incorporates a multinational producing and selling in two countries with three sources of rent, each in a different location: a fixed basic production factor (located with initial...

This paper focuses on the effects of rules of origin in Free Trade Areas. We first point out that even rules of origin which are not restrictive, namely those which do not raise costs of production, have very pronounced effects on trade and investment flows. We then look at some different ways...

Firm size follows Zipf's Law, a very fat-tailed distribution that implies a few large firms account for a disproportionate share of overall economic activity. This distribution of firm size is crucial for evaluating the welfare impact of economic policies such as barriers to entry or trade...

Many economic decisions involve a binary choice - for example, when consumers decide to purchase a good or when firms decide to enter a new market. In such settings, agents' choices often depend on imperfect expectations of the future payoffs from their decision (expectational error) as well as...

In what order should a developing country adopt policy reforms? Do some policies complement each other? Do others substitute for each other? To address these questions, we develop a two-country dynamic general equilibrium model with entry and exit of firms that are monopolistic competitors. The...

Japanese exports between 1880 and 1910 increased massively in volume, changed composition, and shifted away from leading industrialized countries toward poorer Asian neighbors. The product mix also varied with the level of development of the destination, with new products and specializations...

I develop a new theory of marketing costs and introduce it into a model of trade with product differentiation and firm productivity heterogeneity. In this model, a firm enters a market if it makes profits by reaching a single consumer there and pays an increasing marginal cost to access...