This paper explores the impact of trade on growth when firms are heterogeneous. We find that greater openness produces anti-and pro-growth effects. The Melitz-model selection effects raises the expected cost of introducing a new variety and this tends to slow the rate of new-variety introduction...

Governments frequently intervene to support domestic industries, but a surprising amount of this support goes to ailing sectors. We explain this with a lobbying model that allows for entry and sunk costs. Specifically, policy is influenced by pressure groups that incur lobbying expenses to...

Formal analysis of the political economy of trade policy was substantially redirected by the appearance of Gene Grossman and Elhanan Helpman's 1994 paper, "Protection for Sale". Before that article a fairly wide range of approaches were favoured by various authors on various issues, but...

This paper finds that the proliferation of fiscal incentives in the form of tax exemptions in Nicaragua since 1990 represents the indiscriminate allocation of monopoly rents to interest groups. While theory suggests some rents can encourage productive investments, Nicaragua’s tax incentives...

Melitz (2003) demonstrates that greater trade openness raises industry productivity via a selection effect and via a production re-allocation effect. Our comment points out that the set-up assumed in the Melitz model displays a trade off between static and dynamic efficiency gains. That is,...

A Melitz-style model of monopolistic competition with heterogeneous firms is integrated into a simple New Economic Geography model to show that the standard assumption of identical firms is neither necessary nor innocuous. We show that re-locating to the big region is most attractive for the...

This paper studies the impact of trade costs reduction on geographical concentration in the presence of firm heterogeneity and overhead type of export fixed costs. Firm heterogeneity with the export fixed costs hampers full agglomeration through weakening the forward and backward linkages and...

Drawing on an in-depth governance micro-survey of public officials within a country, we address empirically the question of the relative importance of the various determinants of governance. We investigate the causes of poor governance, and show that commonly made inferences about policy based...

In this paper, we make an attempt to enquire into the politics of the government and business relation and how it affected the industrial development in general and expansion of manufacturing sector in particular in the state of Andhra Pradesh. In AP State Business Relations (SBR) have evolved...

This paper presents a model of political competition, where voter decisions are affected by their ideological adherence to political parties. We derive a number of interesting results: First, we show that an equilibrium exists even though voting is fully deterministic. Second, although...