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Trade Adjustment Dynamics and the Welfare Gains from Trade - TDPE

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The authors study how the transitions following a trade reform are shaped by the time it takes for new exporters to grow in the export market. They introduce time and risk into the fixed-variable cost tradeoff central to general equilibrium heterogeneous firm trade models: Investing in exporting gradually and stochastically lowers the costs of exporting. The authors show that the gains from reducing tariffs arise from substituting away from firm creation and towards export capacity. They calibrate their model and estimate the welfare gains from reducing tariffs, which differ substantially from the long-run changes in consumption or trade.

George Alessandria is a Professor of Economics at the University of Rochester. His research interests lie in the area of macroeconomics and monetary trade. He has published papers in AER, QJE, JIE, AEJ:Macro, JME, etc. 

For more information, contact Devashish Mitra,

Sponsored by: Trade, Development and Political Economy, Moynihan Institute of Global Affairs 

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