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Globalization and the gains from variety: size and openness of countries and the extensive margin

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  • Mohler, Lukas

Abstract

With the seminal work of Feenstra (1994) and its application to the United States by Broda and Weinstein (2006) the gains from variety through trade as suggested by Krugman (1979) have become quantifiable. My paper adds to this literature in different respects: On the theoretical side, the Feenstra ratios are reinterpreted to allow for unobserved growth at the extensive margin. Also, the gains from variety are decomposed regarding countries of origin and industries. On the empirical side, the gains from variety are calculated for the United States and Switzerland, a small open economy. Analyzing the empirical results for these countries as well as data from other OECD economies, it is then argued that size and openness of countries as well as the (unobserved) true growth at the extensive margin are important factors in determining the welfare gains from variety.

Suggested Citation

  • Mohler, Lukas, 2009. "Globalization and the gains from variety: size and openness of countries and the extensive margin," MPRA Paper 17592, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17592
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    References listed on IDEAS

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    Cited by:

    1. Xuan Dong Nguyen, 2014. "Effects of Japan's Economic Partnership Agreements on the Extensive Margin of International Trade," The International Trade Journal, Taylor & Francis Journals, vol. 28(2), pages 169-191, June.
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    More about this item

    Keywords

    Welfare Gains from Trade; Trade in Variety; Small Open Economy;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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