The US Gains from Trade: Valuation Using the Demand for Foreign Factor Services
About 8 cents out of every dollar spent in the United States is spent on imports. What if, because of a wall or some other extreme policy intervention, imports were to remain on the other side of the US border? How much would US consumers be willing to pay to prevent this hypothetical policy change from taking place? The answer to this question represents the welfare cost from autarky or, equivalently, the welfare gains from trade. In this article, we discuss how to evaluate these gains using the demand for foreign factor services. The estimates of gains from trade for the US economy that we review range from 2 to 8 percent of GDP.
The authors thank Rodrigo Adao, Dave Donaldson, Thibault Fally, Mark Gertler, Gordon Hanson, Enrico Moretti, and Tim Taylor for very helpful comments and Mauricio Ulate for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- Comparing a counterfactual U.S. economy entirely dependent on domestic resources and one that has access to foreign factor services,...
Arnaud Costinot & Andrés Rodríguez-Clare, 2018. "The US Gains From Trade: Valuation Using the Demand for Foreign Factor Services," Journal of Economic Perspectives, vol 32(2), pages 3-24. citation courtesy of