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3-D Gains from Trade

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  • Doireann Fitzgerald

Abstract

Static trade models imply modest gains from trade. I quantify the gains from trade in a multi-country dynamic stochastic environment, taking into account the contributions to welfare of trade across states of the world, and over time, as well as trade within dates and states (3-D gains). For developing countries, which have volatile productivity, standard risk aversion implies that 3-D gains from trade are at least twice as big as static gains, even under financial autarky. Because productivity is less volatile for developed countries, their 3-D gains from trade are only modestly bigger than static gains, even under complete markets.

Suggested Citation

  • Doireann Fitzgerald, 2024. "3-D Gains from Trade," Working Papers 809, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmwp:99350
    DOI: 10.21034/wp.809
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    References listed on IDEAS

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    1. Helpman, Elhanan & Razin, Assaf, 1979. "A Theory of International Trade Under Uncertainty," Elsevier Monographs, Elsevier, edition 1, number 9780123396501 edited by Shell, Karl.
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    More about this item

    Keywords

    Gains from Trade; International risk sharing;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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