This paper introduces a model of limited consumer attention into an otherwise standard new trade theory model with love-of-variety preferences and heterogeneous firms. In this setting, we show that trade liberalization needs not be welfare enhancing if the consumers' capacity to gather and...

Recent quantitative trade models treat import tariffs as pure cost shifters so that their effects are similar to iceberg trade costs. We introduce revenue-generating import tariffs, which act as demand shifters, into the framework of Arkolakis, Costinot and Rodriguez-Clare (2012), and generalize...

The key result of the so-called New Trade Theory is that countries gain from falling trade costs by an increase in the number of varieties available to consumers. Though the number of varieties in a given country rises, it is also true that global variety decreases from increased competition...

Since firm heterogeneity has been introduced into international trade models, the importance of firm entry and exit (the extensive margin) has been highlighted. Thomas Chaney (2008) illustrates how accounting for heterogenous firms (and this extensive margin) alters the standard gravity...

I outline the effect of business networks on trade, FDI and welfare in a two-country, two-firm duopoly. The network effect, following Greaney (2002), is modelled as a marginal cost disadvantage facing a firm from Foreign in selling to Home. Unlike traditional trade costs, this cost cannot be...

This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety. The paper demonstrates that firm reactions to trade liberalization generate endogenous Ricardian productivity responses at the...

There are two main options for companies to serve foreign markets: exports and foreign direct investment (FDI). Based on the Helpman, Melitz and Yeaple (2004) model for multiple host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate...

There are two main options for companies to serve foreign markets: exports and foreign direct investment (FDI). Based on the Helpman, Melitz and Yeaple (2004) model for two host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate...

Since firm heterogeneity has been introduced into international trade models, the importance of firm entry and exit (the extensive margin) has been highlighted. In fact, Chaney (2008) illustrates how accounting for this extensive margin and heterogenous firms alters the standard gravity...

This paper studies the strategic behavior of multinationals towards weak labor standards in developing countries (South). Without a marginal cost pricing policy, abundant labor in the South gives firms the power to set wages through their choice of output. A strategic reduction in output offsets...