IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/332254.html
   My bibliography  Save this paper

Deriving the Armington, Krugman and Melitz models of trade

Author

Listed:
  • Dixon, Peter B.
  • Rimmer, Maureen T.

Abstract

This paper shows how the Armington, Krugman and Melitz models of international trade are all specialized versions of a basic model. It is inspired by Balistreri and Rutherford (2012) who set out stylized versions of three models: Armington (1969); Krugman (1980); and Melitz (2003). In their exposition, Balsitreri and Rutherford develop each model separately. This paper draws out connections between the three models by developing them sequentially as special cases of a common basic model. We derive the Armington model by imposing strong assumptions on the basic model. We relax some of these assumptions to derive the Krugman model and make further relaxations to derive the Melitz model.

Suggested Citation

  • Dixon, Peter B. & Rimmer, Maureen T., 2012. "Deriving the Armington, Krugman and Melitz models of trade," Conference papers 332254, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332254
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/332254/files/5846.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    3. Chris M. Alaouze & John S. Marsden & John Zeitsch, 1977. "Estimates of the Elasticity of Substitution Between Imported and Domestically Produced Commodities at the Four Digit ASIC Level," Centre of Policy Studies/IMPACT Centre Working Papers o-11, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Chris M. Alaouze, 1976. "Estimation of the elasticity of substitution between imported and domestically produced intermediate inputs," Centre of Policy Studies/IMPACT Centre Working Papers op-07, Victoria University, Centre of Policy Studies/IMPACT Centre.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blanc, Elodie & Monier, Erwan & Fant, Charles & Reilly, John, 2014. "Climate Change, Water Resources and Irrigated Crop Yields: A Modeling Framework for Integrated Assessment of the US," Conference papers 332547, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Peter Dixon & Michael Jerie & Maureen Rimmer, 2016. "Modern Trade Theory for CGE Modelling: The Armington, Krugman and Melitz Models," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 1(1), pages 1-110, June.
    3. Dixon, Peter B. & Jorgenson, Dale W., 2013. "Introduction," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1-22, Elsevier.
    4. Hillberry, Russell & Hummels, David, 2013. "Trade Elasticity Parameters for a Computable General Equilibrium Model," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1213-1269, Elsevier.
    5. Chen, Natalie & Juvenal, Luciana, 2022. "Markups, quality, and trade costs," Journal of International Economics, Elsevier, vol. 137(C).
    6. Tovar, Jorge, 2012. "Consumers’ Welfare and Trade Liberalization: Evidence from the Car Industry in Colombia," World Development, Elsevier, vol. 40(4), pages 808-820.
    7. Corsetti, Giancarlo & Martin, Philippe & Pesenti, Paolo, 2007. "Productivity, terms of trade and the `home market effect'," Journal of International Economics, Elsevier, vol. 73(1), pages 99-127, September.
    8. Redding, Stephen & Weinstein, David, 2017. "Aggregating From Micro to Macro Patterns of Trade," CEPR Discussion Papers 12446, C.E.P.R. Discussion Papers.
    9. Cherkashin, Ivan & Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2015. "Firm heterogeneity and costly trade: A new estimation strategy and policy experiments," Journal of International Economics, Elsevier, vol. 96(1), pages 18-36.
    10. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2018. "Global Firms," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 565-619, June.
    11. Pamela Bombarda, 2016. "Firm heterogeneity and the localization of economic activities," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 1-26, March.
    12. Krautheim, Sebastian & Schmidt-Eisenlohr, Tim, 2011. "Heterogeneous firms, 'profit shifting' FDI and international tax competition," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 122-133, February.
    13. Nathalie Chusseau & Joël Hellier, 2012. "Globalisation and Inequality: Where do we stand?," Journal of Income Distribution, Ad libros publications inc., vol. 21(3-4), pages 7-34, November.
    14. Lorenzo Caliendo & Luca David Opromolla & Fernando Parro & Alessandro Sforza, 2021. "Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement," Journal of Political Economy, University of Chicago Press, vol. 129(12), pages 3491-3545.
    15. Pesenti, Paolo & Martin, Philippe & Corsetti, Giancarlo, 2005. "Productivity Spillovers, Terms of Trade and the 'Home Market Effect'," CEPR Discussion Papers 4964, C.E.P.R. Discussion Papers.
    16. Gao, Yue & Whalley, John & Ren, Yonglei, 2014. "Decomposing China's export growth into extensive margin, export quality and quantity effects," China Economic Review, Elsevier, vol. 29(C), pages 19-26.
    17. Kristian Behrens & Cem Ertur & Wilfried Koch, 2012. "‘Dual’ Gravity: Using Spatial Econometrics To Control For Multilateral Resistance," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(5), pages 773-794, August.
    18. Paul S. Segerstrom & Ignat Stepanok, 2018. "Learning How To Export," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(1), pages 63-92, January.
    19. Thomas Chaney & Ralph Ossa, 2013. "Market Size, Division of Labor, and Firm Productivity," SciencePo Working papers hal-03579667, HAL.
    20. Erhardt, Tobias & Weder, Rolf, 2020. "Shark hunting: On the vulnerability of resources with heterogeneous species," Resource and Energy Economics, Elsevier, vol. 61(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:pugtwp:332254. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.