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The Social Footprint of Globalization: Towards the Introduction of Strategic Industries in Quantitative Trade Models

Author

Listed:
  • Colantone, Italo
  • Ottaviano, Gianmarco
  • Stanig, Piero

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 globalization 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

  • Colantone, Italo & Ottaviano, Gianmarco & Stanig, Piero, 2024. "The Social Footprint of Globalization: Towards the Introduction of Strategic Industries in Quantitative Trade Models," CEPR Discussion Papers 18820, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18820
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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
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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