Variety Gains and the Extensive Margin of Trade

Arbeitspapier

Findings from the literature suggest that previous estimates of the variety gains from trade are too small because of the imprecise measurement of the imported variety set under the Armington assumption. In this contribution, I use results from the literature on multi-product firms to obtain variety gain estimates that account for the entry and exit of firms as well as for product turnover within firms and find that welfare gains increase by a factor of 2.5 compared to the baseline Armington product-country variety differentiation case. I furthermore modify the lambda ratios presented in Feenstra (1994) by assuming that all import variations are due to extensive margin adjustments. Under this extreme assumption, variety gains increase by a factor of six but remain modest in magnitude.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WWZ Discussion Paper ; No. 2012/16

Classification and Topics

• Classification: Wirtschaft ; Trade: General ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Empirical Studies of Trade
• Subject: Margins of trade ; welfare gains from trade ; multi-product firm ; Außenhandelsgewinn ; Außenhandelsstruktur ; Wohlfahrtsanalyse ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mohler, Lukas
• Event: Veröffentlichung
• (who): University of Basel, Center of Business and Economics (WWZ)
• (where): Basel
• (when): 2012

Further information

• DOI: doi:10.5451/unibas-ep61209
• Handle: http://hdl.handle.net/10419/123439
• Last update: 10.03.2025, 11:43 AM CET