In most macroeconomic models, the substitutability between domestic and foreign goods is calibrated using aggregated data. This imposes homogeneous elasticities across goods, and the calibration is only valid under this assumption. If elasticities are heterogeneous, the aggregate...

This paper explores the effect of trade on the relative wage of less-skilled labor through its effect on world prices, which are typically exogenously given under the small open economy assumption. Using the 1995 international input-output data for APEC member countries, we numerically simulate...

A comprehensive empirical investigation is carried out to ascertain the import-reducing effect of trade protection barriers. We first present a statistical summary of the status of global trade protection. Then, based on a monopolistic competition trade model and 1994 cross-country data on trade...

The Houthakker-Magee effect implies that a country facing unfavorable income elasticities in trade must either grow at a slower rate than its trading partners or experience a trend worsening of its current account and/or depreciation of its real exchange rate. Krugman (1989) first documented the...

We analyze trade dynamics following past episodes of financial crises. Using an augmented gravity model and 179 crisis episodes from 1970-2009, we find that there is a sharp decline in a country’s imports in the year following a crisis-19 percent, on average-and this decline is...

This paper estimates the effects of trade liberalization on plant productivity. In contrast to previous studies, we distinguish between productivity gains arising from lower tariffs on final goods relative to lower tariffs on intermediate inputs. Lower output tariffs can produce productivity...

China's sectoral trade composition, product quality mix, and import content of processing exports have all changed substantially during the past decade. This has rendered trade elasticities estimated using aggregate data highly unstable, with more recent data pointing to significantly higher...

This paper examines the mechanisms through which output volatility is related to trade openness using an industry-level panel dataset of manufacturing production and trade. The main results are threefold. First, sectors more open to international trade are more volatile. Second, trade is...