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- Title
Heterogeneous Productivity and the Gains from Trade and FDI.
- Authors
Choudhri, Ehsan; Marasco, Antonio
- Abstract
Nontraded goods account for a major share of GDP in most economies, but have not been incorporated in the welfare analysis of monopolistic-competition models with heterogeneous productivity. This paper extends Helpman, Melitz and Yeaple (American Economic Review 94(1):300-316, ) to explore welfare effects in the presence of a nontraded good. We derive new analytical results about how the gains from trade and FDI are determined and affected by key parameters in the case of symmetric countries. The model is calibrated to a country group that includes all major developed countries. The gains from openness (trade and FDI) are found to be substantial (between 3.24 and 6.27 per cent of income) even if nontraded goods represent a major part of the economy. Most of these gains are attributed to trade rather than FDI.
- Subjects
PRODUCTION (Economic theory); FOREIGN investments; NONTRADED goods; PUBLIC welfare; ECONOMIC competition; PARAMETER estimation; DEVELOPED countries
- Publication
Open Economies Review, 2013, Vol 24, Issue 2, p339
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1007/s11079-012-9243-7