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Heterogeneous Agent Trade

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  • Michael E. Waugh

Abstract

This paper studies the implications of household heterogeneity for trade. I develop a model where household heterogeneity is induced via incomplete markets and results in heterogeneous price elasticities. Conditional on exposure to trade, heterogeneous price elasticities imply that different households value price changes differently, and thus rich and poor households experience different gains from trade. I calibrate the model to match bilateral trade flows and micro-facts about household-level expenditure patterns and elasticities. I find gains from trade that are pro-poor and that the average gains from trade are substantially larger than representative agent benchmarks.

Suggested Citation

  • Michael E. Waugh, 2023. "Heterogeneous Agent Trade," NBER Working Papers 31810, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31810
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    References listed on IDEAS

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    1. Novy, Dennis, 2013. "International trade without CES: Estimating translog gravity," Journal of International Economics, Elsevier, vol. 89(2), pages 271-282.
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    Cited by:

    1. Maximiliano Dvorkin & Brian Greaney, 2024. "The geography of wealth: shocks, mobility, and precautionary savings," Working Papers 2024-033, Federal Reserve Bank of St. Louis, revised 30 Sep 2024.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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