TY  - JOUR
AU  - Burstein,Ariel
AU  - Cravino,Javier
TI  - Measured Aggregate Gains from International Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17767
PY  - 2012
Y2  - January 2012
UR  - http://www.nber.org/papers/w17767
L1  - http://www.nber.org/papers/w17767.pdf
N1  - Author contact info:
Ariel Burstein
Department of Economics
Bunche Hall 8365
Box 951477
UCLA
Los Angeles, CA 90095-1477
Tel: 310/206-6732
Fax: 310/825-9528
E-Mail: arielb@econ.ucla.edu

Javier Cravino
Department of Economics
UCLA
Bunche Hall 8365
Los Angeles, CA 90095-1477
E-Mail: jcravino@ucla.edu
AB  - Do theoretical welfare gains from trade translate into aggregate measures of economic activity? We calculate the changes in real GDP and real consumption that result from changes in trade costs in a range of workhorse trade models, following the procedures outlined by statistical agencies in the United States. Our main findings are as follows: First, real GDP and measured aggregate productivity rise in response to reductions in variable trade costs if GDP deflators capture the decline in trade costs. Second, with balanced trade in each country, changes in world real consumption and changes in world real GDP (i.e.: weighting the change in each country by its nominal GDP) in response to changes in variable trade costs coincide, up to a first-order approximation, with changes in world theoretical (welfare-based) consumption. The equivalence between measured consumption and theoretical consumption holds country-by-country under stronger conditions. Third, for given trade shares and changes in variable trade costs, changes in real GDP and changes in world real consumption are approximately equal in magnitude across the models we consider.
ER  -