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tariff in either sector boosts the size and productivity of that sector, raising welfare. While these forces are reinforced … potential productivity benefits. The welfare benefits of final-good tariffs thus tend to be larger, with the optimal degree of …
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In this paper we propose a theoretical model of international trade that shows the welfare gains from trade are much higher than what Arkolakis et al 2014 find. We use the idea of weak linkages and the complementarity between the intermediate goods as in Jones 2011. The idea is simple....
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