Federico Etro

University of Venice Ca' Foscari

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NBER Working Papers and Publications

February 2016International Trade with Indirect Additivity
with Paolo Bertoletti, Ina Simonovska: w21984
We develop a general equilibrium model of monopolistic competition and trade based on indirectly additive preferences and heterogenous firms. It generates markups independent from destination population but increasing in destination per capita income, as documented empirically. Trade liberalization delivers an increase in consumed variety and incomplete cost pass-through. This leads to welfare gains that can be much lower than those predicted by comparable models with different preferences. We introduce a tractable utility function that further predicts that small firms grow more during trade liberalization and pass through cost changes more than do large firms. Once we estimate the model to match moments from cross-firm and cross-country data we (i) find quantitatively large differences i...
December 2001Institutional Rules for Federations
with Alberto Alesina, Ignazio Angeloni: w8646
We study the organization of federations - or international unions - which decide together the provision of certain public goods. The benefit of centralization depends on the internalization of the spillovers, that of decentralization on the adaptability to local differences. We individuate as an optimal institutional design a form of fiscal federalism based on decentralization of expenditures and a system of subsidies and transfers between countries. Since this solution can be politically unfeasible, we study institutional compromises between a centralized federation and a decentralized one. 'Flexible unions' and federal mandates in which both the state and federal levels are involved in providing public goods are typically superior to complete centralization and politically feasible. Fin...
The Political Economy of International Unions
with Alberto Alesina, Ignazio Angeloni: w8645
We model an international union as a group of countries deciding together the provision of certain public goods and policies because of spillovers. The countries are heterogeneous either in preferences and/or in economic fundamentals. The trade off between the benefits of coordination and the loss of independent policymaking endogenously determines the size, the composition and the scope of unions. Our model implies that the equilibrium size of the union is inversely related to the degree of heterogeneity between countries and to the spectrum of common policies. Hence, there is a trade off between enlargement and deepening of coordination: a union involved in too many collateral activities will be favored by few countries, while a union which focuses on a core of activities will be favored...

Published: Alesina, Alberto, Ignazio Angeloni and Federico Etro. “International Unions." American Economic Review 95 (June 2005): 602-15.

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