| Popis: |
In this paper we propose a theoretical model of international trade that shows the welfare gains from trade are much higher than what Arkolakis et al 2014 find. We use the idea of weak linkages and the complementarity between the intermediate goods as in Jones 2011. The idea is simple. Production requires many different intermediate goods to get together and if the firm cannot purchase any of them from home nor from foreign, the production process fails. Same is true if any of these linkages are low productive and the firm cannot import it from a high productive sector from abroad. We propose a multi-industry multi-country trade model, and show that the complementarity of the intermediates goods results in much larger welfare gains than the current literature measures, using the same trade data. Also, similar to Ossa2015, we show that the variation of trade elasticities among industries greatly increases the welfare gains from trade; using Ossa's mechanism alongside the assumption of complementarity magnify the estimated welfare gains from trade. |
