For the study of economic integration, it is costumary to use a three countryworld, where two of the countries may introduce forms of closer economic cooperation. In the present model, we follow this tradition but put special emphasis on the role of credit and entrepreneurship. Our model is of...

We show that the standard concertina result for tariff reforms – i.e. lowering the highest tariff increases welfare – no longer holds in general if we allow for international capital mobility. The result can break down if the good whose tariff is lowered is not capital intensive. If the...

Trade liberalization leads to significant changes in countries’ economic structures. The implied variation in the level and nature of specialization has important consequences for liberalizing economies. It is therefore extremely relevant for those countries pursuing trade liberalization...

International trade in capital goods has quantitatively important effects on economic development through capital formation and TFP. Capital goods trade enables poor countries to access more efficient technologies, leading to lower relative prices of capital goods and higher capital-output...

Economic activities are highly clustered. Why is geographic concentration becoming a predominant feature of modern economies? On the basis of the empirical models developed by the 'new' theories of international trade, our answer is that increasing returns are the driving force of economic...

Since Leontief's (1953) seminal work on the factor content of trade, the validity of the Heckscher-Ohlinmodel has been judged not only on the basis of formal tests of the theory but also tested against prior expectation. In this vein, this paper uses the Heckscher-Ohlin-Vanek (HOV) approach to...

In this paper we provide a method to characterise global value chains and a related decomposition of bilateral gross exports by distinguishing three different stages of the value-added flows: (i) the source of value added, (ii) the final assembly stage of a product, and (iii) the final...

Using Japanese firm data covering the Japanese financial crisis in the early 1990s, we find that exporters' domestic sales declined more significantly than their foreign sales, which in turn declined more significantly than non-exporters' sales. This stylized fact provides a new litmus test for...

This paper employs a quantitative trade model to globally assess the implications of the EU carbon border adjustment mechanism (CBAM) on trade flows, welfare, real wages and CO2 emissions. We quantify the general equilibrium effects on EU members and non-members under various carbon tax prices,...

This paper revisits the Heckscher-Ohlin-Vanek (HOV) theorem and investigates its fit for digital tasks and ICT capital, which both represent endowment factors that are expected to shape the digital transformation. We use a theory-consistent methodology for calculating the measured net factor...