Increasing-returns-to-scale imperfect competition trade models predict a more than proportionate relationship between the larger country's share in world endowments and its share in producing firms: the so called home market effect (HME). While this result plays a key role in empirical testing,...

Recent empirical evidence suggests that prices for some goods and services are higher in larger markets. This paper provides a demand-side explanation for this phenomenon when firms can choose how much to differentiate their products in a model of monopolistic competition with horizontal product...

Lumpiness of production factors within a country might overturn the predictions for the structure of trade by the factor-abundance (HO) model. Trade patterns, as predicted by this model, can both be magnified or reversed by uneven concentration of production factors within a country. Cities are...

Success in international trade depends, amongst other things, on distance from markets. Most new economic geography models focus on the distance between countries. In contrast much less theorizing and empirical analysis have focused on how distances within a country for instance due to the...

This paper shows that the degree of competition affects the current account response to nominal shocks. The mechanism hinges on the relationship between the mark-up and the degree of real rigidity of prices. In a model with intermediate goods, the degree of real rigidity increases in the markup....

In this paper, we study the effects of government debt on macroeconomic aggregates in a non-Ricardian framework. We develop a micro-founded framework which combines time-varying markups, endogenous labor supply and overlapping generations based on infinitely-lived families. The main contribution...