We characterize the equilibrium and optimal resource allocations in a general equilibrium model of monopolistic competition with multiple asymmetric sectors and heterogeneous firms. We first derive general results for additively separable preferences and general productivity distributions, and...

We characterize the equilibrium and optimal resource allocations in a general equilibrium model of monopolistic competition with multiple asymmetric sectors and heterogeneous firms. We first derive general results for additively separable preferences and general productivity distributions, and...

Equilibria and optima generally differ in imperfectly competitive markets. While this is well understood theoretically, it is unclear how large the welfare distortions are in the aggregate economy. Do they matter quantitatively? To answer this question, we develop a multi-sector monopolistic...

We analyze a class of 'large group' Chamberlinian monopolistic competition models using multiplicatively quasi-separable (MQS) and additively quasi-separable (AQS) functions. We first prove that the MQS and AQS functions are equivalent to the 'constant relative risk aversion' (CRRA) and...

We investigate how international trade and trade policy possibly affect the regional distribution of economic activities within a country involved in a process of economic integration. Our analysis reveals that the impact of decreasing international trade costs on the spatial distribution of...

We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate...

We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping man- ufactured goods, and freight rates are set to clear transport markets. Each carrier must commit to...

We develop an economic geography model where mobile skilled workers choose to either work in a production sector or to become part of an unproductive elite. The elite sets income tax rates to maximize its own welfare by extracting rents, thereby influencing the spatial structure of the economy...

The world is replete with spatial frictions. Shipping goods across cities entails trade frictions. Commuting within cities causes urban frictions. How important are these frictions in shaping the spatial economy? We develop and quantify a novel framework to address this question at three...

The standard two-country model of international trade with monopolistic competition predicts a more-than-proportional relationship between a country’s share of world production of a good and its share of world demand for that same good, a result known as the ‘home market effect’. We first...