TY  - JOUR
AU  - Alvarez,Fernando
AU  - Lucas,Robert E.
TI  - General Equilibrium Analysis of the Eaton-Kortum Model of International Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11764
PY  - 2005
Y2  - November 2005
UR  - http://www.nber.org/papers/w11764
L1  - http://www.nber.org/papers/w11764.pdf
N1  - Author contact info:
Fernando E. Alvarez
University of Chicago
Department of Economics
1126 East 59th Street
Chicago, IL 60637
Tel: 773/702-4412
Fax: 773/702-8490
E-Mail: f-alvarez1@uchicago.edu

Robert E. Lucas, Jr.
Department of Economics
The University of Chicago
1126 East 59th Street
Chicago, IL  60637
Tel: 773/702-8179
Fax: 773/702-8490
E-Mail: relucas@midway.uchicago.edu
AB  - We study a variation of the Eaton-Kortum model, a competitive, constant-returns-to-scale multicountry Ricardian model of trade. We establish existence and uniqueness of an equilibrium with balanced trade where each country imposes an import tariff. We analyze the determinants of the cross-country distribution of trade volumes, such as size, tariffs and distance, and compare a calibrated version of the model with data for the largest 60 economies. We use the calibrated model to estimate the gains of a world-wide trade elimination of tariffs, using the theory to explain the magnitude of the gains as well as the differential effect arising from cross-country differences in pre-liberalization of tariffs levels and country size.
ER  -