Working Paper: CEPR ID: DP9398
Authors: Arnaud Costinot; Andres Rodriguez-Clare
Abstract: We review a recent body of theoretical work that aims to put numbers on the consequences of globalization. A unifying theme of our survey is methodological. We rely on gravity models and demonstrate how they can be used for counterfactual analysis. We highlight how various economic considerations---market structure, firm-level heterogeneity, multiple sectors, intermediate goods, and multiple factors of production---affect the magnitude of the gains from trade liberalization. We conclude by discussing a number of outstanding issues in the literature as well as alternative approaches for quantifying the consequences of globalization.
Keywords: counterfactual analysis; globalization; gravity models; trade policy; welfare analysis
JEL Codes: F11; F12; F13; F15; F17; F60; F62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decrease in iceberg trade costs (F12) | increase in welfare (I38) |
| trade elasticity and macroeconomic data (F40) | increase in welfare (I38) |
| transitioning from trade equilibrium to autarky (D59) | decrease in real income (E25) |
| multiple sectors and intermediate goods (L60) | increase in gains from trade (F11) |