Shanghai University of Finance and Economics
421, School of Economics
111 Wuchuan Rd
Shanghai, 200433 CHINA
NBER Working Papers and Publications
|December 2017||Geography, Income, and Trade in the 21st Century|
with Christopher M. Meissner: w24121
We investigate the relationship between GDP per capita, trade costs, demand, and income inequality between 1996 and 2011. Specifically we apply the aggregate AIDS-based gravity model as developed in Fajgelbaum and Khandelwal (2016) to a panel of 40 countries to generate a new measure of market potential. We then relate this measure of market potential to country level GDP per capita finding a significant positive relationship which performs better than CES-based measures of market potential. The AIDS model allows for non-homotheticities in demand and the possibility that nations produce goods with higher or lower income elasticities so that income inequality and GDP per capita matter for the direction of trade. CES-based market potential measures are typically only a function of overall in...
|February 2013||Market Potential and the Rise of US Productivity Leadership|
with Christopher M. Meissner: w18819
The US advantage in per capita output, apparent from the late 19th century, is frequently attributed to its relatively large domestic market. We construct market potential measures for the US and 26 other countries between 1880 and 1913 based on a general equilibrium model of production and trade. When compared to other leading economies in 1900, the year around which the US overtakes Britain in productivity leadership, the US does not have the overwhelming lead in market potential that it has in GDP per capita. Still, market potential is positively related to the cross-country distribution of income per capita, but the impact of market potential is likely to be very heterogeneous. We illustrate this in a quantitative calculation of the welfare gains from removing international borders in ...
Published: Journal of International Economics Volume 96, Issue 1, May 2015, Pages 72–87 Cover image Market potential and the rise of US productivity leadership Dan Liua, b, , Christopher M. Meissnerc, d, ,