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The social footprint of globalisation: towards the introduction of strategic industries in quantitative trade models

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  • Italo Colantone
  • Gianmarco Ottaviano
  • Piero Stanig

Abstract

We argue that our understanding of industrial policy in the presence of ‘strategic’ industries that exert positive externalities on the national economy may benefit from an extension of quantitative general equilibrium trade models making the extent and pattern of trade-induced reallocations more salient. To make these features relevant for national welfare, we introduce the notion of the ‘social footprint’ of globalisation as the result of suboptimal trade-induced structural transformation in the presence of externalities. For proof of concept, we use simple workhorse models featuring two countries and two industries (only one of which is ‘strategic’) to highlight the role of the ‘scale elasticity’ of the strategic industry and the consequences of the most common assumptions on market structure in quantitative trade analyses.

Suggested Citation

  • Italo Colantone & Gianmarco Ottaviano & Piero Stanig, 2024. "The social footprint of globalisation: towards the introduction of strategic industries in quantitative trade models," Spatial Economic Analysis, Taylor & Francis Journals, vol. 19(3), pages 345-363, July.
    • Handle: RePEc:taf:specan:v:19:y:2024:i:3:p:345-363
    DOI: 10.1080/17421772.2023.2267613
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    References listed on IDEAS

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    1. Dominick Bartelme & Arnaud Costinot & Dave Donaldson & Andres Rodriguez-Clare, "undated". "The Textbook Case for Industrial Policy: Theory Meets Data," Working Papers 675, Research Seminar in International Economics, University of Michigan.
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    3. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    4. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    5. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F15 - International Economics - - Trade - - - Economic Integration

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