This paper argues that labor market distortions in transition and developing economies help explain differential impacts of trade liberalization. We assume that workers differ in ability. In a market economy their earnings depend on their ability. However, earnings are independent of ability due...

We study unanticipated tariffs on imports of intermediate goods in a setting with firm-to-firm supply relationships. Firms that produce differentiated products conduct costly searches for potential input suppliers and negotiate bilateral prices with those that pass a reservation level of match...

This paper examines the extent to which the process of globalization can explain the observed widening in the cross--country distribution of output--per--worker. In particular examine whether the opening up of trade in a Hecksher--Ohlin type model of trade can explain the observed changes. On...

This paper asks why developing country policymakers have been so reluctant to undertake trade reform until the 1980s, and why many of them have embraced open trade policies so wholeheartedly since then. To answer these questions, the paper develops a heuristic index of the "political...

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...

We formulate a two-country model with monopolistic competition and heterogeneous firms to reconsider labor market linkages in open economies. Labor-market imperfections arise by virtue of country-specific real minimum wages. Two principal experiments are considered. First, we show that trade...

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...

This paper focuses on three unresolved issues with regard to the impact of trade reform. First, many studies linking trade reform to long run growth are surprisingly fragile. To illustrate the problems with this literature, we examine a popular measure of openness recently introduced by Sachs...