Comments on: Arkolakis, Costinot, and Rodriguez-Clare: “New Trade Models, Same Old Gains?”

By: Agent Continuum

Agent Continuum — Wed, 20 Jan 2010 01:34:09 +0000

Sorry, my fault.

I can’t imagine, though, what it would mean to cut most countries off from world oil markets.

By: jdingel

jdingel — Wed, 20 Jan 2010 00:19:01 +0000

They say:

“We then use our assumption that epsilon is constant across equilibria to integrate small changes in real income between the initial trade equilibrium and the autarky equilibrium. This allows us to establish that the total size of the gains from trade, i.e. the percentage change in real income necessary to compensate a representative consumer for going to autarky, is equal to lambda^(1/epsilon)-1.”

By: Agent Continuum

Agent Continuum — Wed, 20 Jan 2010 00:15:03 +0000

The thing that might be a bit misleading… they’re looking at a change in trade costs at the margin and they find small gains from it. That doesn’t tell us anything about the gains from trade in a larger context, i.e. versus autarky.