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Stefano Bolatto

4 November 2013 @ 12:45 - 13:45

 

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Date:
4 November 2013
Time:
12:45 - 13:45
Event Category:

“Trade across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities”

abstract

Over the last decade, quantitative models of international trade have given a strong boost to trade literature,
as they provide an excellent framework for both general equilibrium counterfactual studies and
empirical studies based on firm-level data. Many authors have also proposed their variants of some of the most
influential models, among which we can include Eaton and Kortum (2002) and Melitz(2003).
In particular, multi-sector versions of the model of Eaton and Kortum usually restrict trade elasticities to
be identical across sectors, with potentially distorting effects on the estimates
of the model parameters. This paper allows for heterogeneous sectoral trade elasticities and estimates
them by regressing an equation for bilateral market shares, with standard gravity variables used to
model trade barriers. Results show that sectors differ significantly in the size of trade elasticities.
The latter, in turn, are used to compute “trade-revealed” average efficiencies for 20 countries and 13
manufacturing sectors. By quantifying the gains from trade in terms of labor productivity, the paper
also assesses the relative importance of the reallocation of production within and between sectors.
Gains turn out to be largely due to the reallocation within sectors, especially for richer countries.