The Elusive Pro-Competitive Effects of Trade
By Costas Arkolakis, Arnaud Costinot, David J. Donaldson, A. Rodríguez-Clare. 2018
376 citations recorded by the source corpus.
We study the pro-competitive effects of international trade, or lack thereof, in models with monopolistic competition, firm-level heterogeneity, and variable markups. Under standard restrictions on consumers’ demand and the distribution of firms’ productivity, we derive two theoretical results. First, although markups vary acrossfirms, the distribution of markups and the share of aggregate profits in revenues are invariant to changes in openness to trade. Second, although the distribution of markups and the share of aggregate profits in revenues are unaffected by trade, gains from trade liberalization are weakly lower than those predicted by the models with constant markups considered in Arkolakis, Costinot, and Rodriguez-Clare (2012).
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/967cb27c389c9fa12c857b0ac0410f6228bf7f93
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Citations in the corpus
- Equilibrium Technology Diffusion, Trade, and Growth (2021, background): “Arkolakis et al. (2019) explore non-CES demand functions and non-Pareto productivity distributions and conclude that”
- WTO Accession and Performance of Chinese Manufacturing Firms (2017, background): “In particular, Arkolakis et al. (2012, 2015) show that in a broad class of models aggregate welfare gains can be captured a few sufficient statistics. However, Edmond et al. (2015) have shown that welfare gains can be far greater in models where trade reduces monopoly or duopoly power. De Loecker et”
- Trade Liberalization and Markup Dispersion: Evidence from China's WTO Accession (2015, methodology): “7 Speci cally, the Lagrangian function associated with optimization problem (4) can be written as”
- The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade (2016, neutral): “these gains, even absent frictions, are likely to be moderate (Arkolakis et al, 2012; Arkolakis et al., 2015).”
- Idea Flows, Economic Growth, and Trade (2013, neutral): “Section 6 provides a brief discussion of some substantive conclusions suggested by these exercises and of directions for future work that they suggest.”
- Monopolistic Competition and Optimum Product Diversity under Firm Heterogeneity (2019, background): “As market allocations maximize world welfare, the indirect effects can be ignored when studying the impact of exogenous shocks on welfare under CES demand (for example, Atkeson and Burstein 2010). To highlight the potential scope of market imperfections, we generalize the well known CES demand frame”
- Globalization, Markups, and US Welfare (2017, neutral): “This finding resonates well with the recent paper of Arkolakis et al. (2015), who argue that with a broad class of preferences including translog, the formula for the gains from trade is much the same as that obtained in the CES case analyzed by Arkolakis, Costinot, and RodriguezClare (2012). But de”
- Dynamic Selection: An Idea Flows Theory of Entry, Trade and Growth (2016, background): “Edmond, Midrigan and Xu (2012) and Impullitti and Licandro (2012) find that when there are variable mark-ups pro-competitive effects can substantially increase the gains from trade, although Arkolakis et al. (2012) show that this will not always be the case.”
- Product Mix and Firm Productivity Responses to Trade Competition (2020, methodology): “consistent with the estimates of Arkolakis et al. (2018) for bilateral trade demand.”
- New Trade Models, New Welfare Implications (2015, background): “ACR and Costinot and RodríguezClare (2014) explore multiple sectors, tradable intermediate inputs and multiple factors of production; Arkolakis et al. (2014) and Edmond, Midrigan, and Xu (2012) examine variable markups; Head, Mayer, and Thoenig (2014) analyze a log normal productivity distribution; ”