NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Accounting for the New Gains from Trade Liberalization

Chang-Tai Hsieh, Nicholas Li, Ralph Ossa, Mu-Jeung Yang

NBER Working Paper No. 22069
Issued in March 2016, Revised in January 2018
NBER Program(s):Economic Fluctuations and Growth, International Trade and Investment, Productivity, Innovation, and Entrepreneurship

We challenge the conventional wisdom on the variety and productivity gains from trade liberalization which are commonly referred to as "new" gains from trade. In particular, we show that the import variety gains measured in studies such as Broda and Weinstein (2006) are counteracted by exactly analogous domestic variety losses. Similarly, we show that the domestic productivity gains measured in studies such as Trefler (2004) are counteracted by exactly analogous import productivity losses. We then account for all these gains and losses in an application to the Canada-US Free Trade Agreement and show that Canada actually experienced net "new" losses from trade.

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Document Object Identifier (DOI): 10.3386/w22069

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