NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Trade Theory with Numbers: Quantifying the Consequences of Globalization

Arnaud Costinot, Andrés Rodríguez-Clare

NBER Working Paper No. 18896
Issued in March 2013
NBER Program(s):   ITI

We review a recent body of theoretical work that aims to put numbers on the consequences of globalization. A unifying theme of our survey is methodological. We rely on gravity models and demonstrate how they can be used for counterfactual analysis. We highlight how various economic considerations—market structure, firm-level heterogeneity, multiple sectors, intermediate goods, and multiple factors of production—affect the magnitude of the gains from trade liberalization. We conclude by discussing a number of outstanding issues in the literature as well as alternative approaches for quantifying the consequences of globalization.

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This paper was revised on July 1, 2013

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