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Functional Forms for Tractable Economic Models and the Cost Structure of International Trade

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  • Michal Fabinger

    (Faculty of Economics, The University of Tokyo)

  • E. Glen Weyl

    (Microsoft Research New York City and Department of Economics, Princeton Unviersity)

Abstract

We present functional forms allowing a broader range of analytic solutions to common economic equilibrium problems. These can increase the realism of pen-and-paper solutions or speed large-scale numerical solutions as computational subroutines. We use the latter approach to build a tractable heterogeneous firm model of international trade accommodating economies of scale in export and diseconomies of scale in production, providing a natural,unified solution to several puzzles concerning trade costs. We briefly highlight applications in a range of other fields. Our method of generating analytic solutions is a discrete approximation to a logarithmically modified Laplace transform of equilibrium conditions.

Suggested Citation

  • Michal Fabinger & E. Glen Weyl, 2018. "Functional Forms for Tractable Economic Models and the Cost Structure of International Trade," CIRJE F-Series CIRJE-F-1092, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2018cf1092
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    Cited by:

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    3. Simon Cowan, 2023. "Welfare-increasing monopolization," Economics Series Working Papers 1006, University of Oxford, Department of Economics.
    4. William Griffiths & Duangkamon Chotikapanich & Gholamreza Hajargasht, 2022. "A note on inequality measures for mixtures of double Pareto–lognormal distributions," Australian Economic Papers, Wiley Blackwell, vol. 61(2), pages 280-290, June.

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