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Journal ArticleDOI

A Theory of Demand for Products Distinguished by Place of Production (Une théorie de la demande de produits différenciés d'après leur origine) (Una teoría de la demanda de productos distinguiéndolos según el lugar de producción)

01 Mar 1969-Vol. 16, Iss: 1, pp 159-178
TL;DR: In this article, Solow et al. present an approach for the analysis of the variation of a flux commercial particulier entre pays in the context of recherche.
Abstract: Cette A©tude offre un appui thA©orique A certaines pratiques de recherche selon lesquelles la variation d'un flux commercial particulier entre pays est considA©rA©e comme la rA©sultante de deux A©lA©ments: la modification qui se produirait si le pays fournisseur donnA© devait conserver sa part du marchA©, et l'A©cart entre les ventes effectives et celles qui s'effectueraient si sa part du marchA© demeurait constante. Ces pratiques comprennent la mA©thode de prA©vision des A©changes dans laquelle: 1) les prA©visions de l'expansion des divers marchA©s, combinA©es avec une matrice relative A la pA©riode courante, fournissent une matrice pour la pA©riode future A©tablie sur la base de parts du marchA© constantes; 2) cette matrice A©tablie sur la base de parts du marchA© constantes est modifiA©e pour tenir compte de facteurs censA©s engendrer des gains ou des pertes de parts. Dans la prA©sente A©tude, on fait valoir que l'analyse des modifications des flux commerciaux en deux A©lA©ments reprA©sentant, l'un des parts du marchA© constantes et l'autre des parts du marchA© modifiA©es, n'intA©resse pas seulement la comptabilitA©, mais qu'elle peut certainement Aatre rattachA©e purement et simplement A la thA©orie traditionnelle du comportement des consommateurs. On part de l'hypothA¨se que les produits sont diffA©renciA©s non seulement d'aprA¨s leur espA¨ce mais A©galement d'aprA¨s leur origine. Autrement dit, on suppose que des produits originaires de diffA©rents pays et offerts concurrement sur le mAame marchA© ne sont pas susceptibles de se remplacer parfaitement. Il est dA©montrA© ensuite qu'une spA©cialisation poussA©e et suffisamment rA©aliste de la fonction de bien-Aatre de Hicks permet d'obtenir des A©quations assez simples de la demande englobant les deux A©lA©ments mentionnA©s plus haut. Cette spA©cialisation se fonde sur l'hypothA¨se "d' indA©pendance" (telle qu'elle a A©tA© formulA©e par R. M. Solow, R. H. Strotz et d'autres) ainsi que sur celle selon laquelle les A©lasticitA©s du remplacement entre produits offerts concurremment sur un marchA© quelconque donnA© sont constantes et A©gales. /// Este estudio ofrece un apoyo teA³rico a ciertas prAicticas de investigaciA³n segAon las cuales a la variaciA³n en una corriente determinada de intercambio entre paA­ses se la considera como la suma de dos componentes: la variaciA³n que ocurrirA­a si un paA­s vendedor dado mantuviera su participaciA³n en el mercado, y la desviaciA³n de las ventas efectivas con respecto a las ventas que tendrA­an lugar de permanecer constantes las participaciones. Dichas prAicticas incluyen la previsiA³n de los intercambios, en la cual 1) los pronA³sticos del crecimiento en diversos mercados, junto con la matriz de un perA­odo de base, resultan en una matriz de participaciones constantes para el perA­odo futuro, y 2) se modifica esta matriz de participaciones constantes para tener en cuenta a los factores que se espere que produzcan pA©rdidas o ganancias en las participaciones. En este trabajo se mantiene que el anAilisis de las variaciones en las corrientes de intercambio comercial, separando el componente de participaciones constantes y el de ajuste de las participaciones, es mAis que una simple cuestiA³n de contabilidad, y en realidad se le puede ligar sencilla y rigurosamente a la teorA­a tradicional del comportamiento del consumidor. El punto de partida es el supuesto de que se establecen distinciones no solamente segAon la clase de los productos sino tambiA©n segAon el lugar de producciA³n de los mismos. Es decir, se supone que los productos de distintos paA­ses que compiten en el mismo mercado son sustitutos imperfectos. Se demuestra luego que una especializaciA³n eficaz y bastante realista de la funciA³n hicksiana del bienestar lleva a relaciones de demanda muy sencillas en las que se incluyen los componentes de la participaciA³n constante y del ajuste de las participaciones. Esta especializaciA³n exige el supuesto de "independencia" (que formularan R. M. Solow, R. H. Strotz, et al.) y el supuesto de que las elasticidades de sustituciA³n entre los productos que compiten en un mercado determinado son constantes e iguales.

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Citations
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Journal ArticleDOI
TL;DR: This article developed a Ricardian trade model that incorporates realistic geographic features into general equilibrium and delivered simple structural equations for bilateral trade with parameters relating to absolute advantage, comparative advantage, and geographic barriers.
Abstract: We develop a Ricardian trade model that incorporates realistic geographic features into general equilibrium It delivers simple structural equations for bilateral trade with parameters relating to absolute advantage, to comparative advantage (promoting trade), and to geographic barriers (resisting it) We estimate the parameters with data on bilateral trade in manufactures, prices, and geography from 19 OECD countries in 1990 We use the model to explore various issues such as the gains from trade, the role of trade in spreading the benefits of new technology, and the effects of tariff reduction

3,782 citations


Cites background or methods from "A Theory of Demand for Products Dis..."

  • ...For one thing, CGE models typically treat each country’s goods as unique, entering preferences separately as in Armington (1969).8 In contrast, we take the Ricardian approach of defining the set of commodities independent of country, with specialization 5What has been done focuses on bilateral…...

    [...]

  • ...Previous theoretical justifications posit that every country specializes in a unique set of goods, either using Armington (1969) preferences, as in Anderson (1979), or by assuming monopolistic competition, as in Helpman (1987) and Bergstrand (1989)....

    [...]

Book ChapterDOI
TL;DR: In this article, the estimation and interpretation of gravity equations for bilateral trade is discussed, and several theory-consistent estimation methods are presented. But the authors argue against sole reliance on any one method and instead advocate a toolkit approach.
Abstract: This chapter focuses on the estimation and interpretation of gravity equations for bilateral trade. This necessarily involves a careful consideration of the theoretical underpinnings since it has become clear that naive approaches to estimation lead to biased and frequently misinterpreted results. There are now several theory-consistent estimation methods and we argue against sole reliance on any one method and instead advocate a toolkit approach. One estimator may be preferred for certain types of data or research questions but more often the methods should be used in concert to establish robustness. In recent years, estimation has become just a first step before a deeper analysis of the implications of the results, notably in terms of welfare. We try to facilitate diffusion of best-practice methods by illustrating their application in a step-by-step cookbook mode of exposition.

1,852 citations


Cites background from "A Theory of Demand for Products Dis..."

  • ...As in Armington (1969), each country is the unique source of each product (there is National Product Differentiation, NPD)....

    [...]

Journal ArticleDOI
TL;DR: This article showed that the import of new product varieties has contributed to national welfare gains in the United States over the last three decades (1972-2001) by increasing the number of imported product varieties by a factor of four.
Abstract: Since the seminal work of Krugman (1979), product variety has played a central role in models of trade and growth. In spite of the general use of love-of-variety models, there has been no systematic study of how the import of new varieties has contributed to national welfare gains in the United States. In this paper we show that the unmeasured growth in product variety from US imports has been an important source of gains from trade over the last three decades (1972-2001). Using extremely disaggregated data, we show that the number of imported product varieties has increased by a factor of four. We also estimate the elasticities of substitution for each available category at the same level of aggregation, and describe their behavior across time and SITC-5 industries. Using these estimates we develop an exact price index and find that the upward bias in the conventional import price index is approximately 1.2 percent per year – double the estimated impact due to hedonic adjustments on the CPI. The magnitude of this bias suggests that the welfare gains from variety growth in imports alone are 2.8 percent of GDP per year.

1,735 citations

Journal ArticleDOI
TL;DR: The authors found that the extensive margin accounts for around 60 percent of the greater exports of larger economies and that richer countries export higher quantities at modestly higher prices, while small economies export more in absolute terms than do small economies.
Abstract: Large economies export more in absolute terms than do small economies. We use data on shipments by 126 exporting countries to 59 importing countries in 5,000 product categories to answer the question: How? Do big economies export larger quantities of each good (the intensive margin), a wider set of goods (the extensive margin), or higher-quality goods? We find that the extensive margin accounts for around 60 percent of the greater exports of larger economies. Within categories, richer countries export higher quantities at modestly higher prices. We compare these findings to some workhorse trade models. Models with Armington national product differentiation have no extensive margin, and incorrectly predict lower prices for the exports of larger economies. Models with Krugman firm-level product differentiation do feature a prominent extensive margin, but overpredict the rate at which variety responds to exporter size. Models with quality differentiation, meanwhile, can match the price facts. Finally, models with fixed costs of exporting to a given market might explain the tendency of larger economies to export a given product to more countries.

1,735 citations

Journal ArticleDOI
TL;DR: In this article, an integrated explanation and empirical analysis of the polarization of U.S. employment and wages between 1980 and 2005, and the concurrent growth of low-skill service occupations is presented.
Abstract: We offer an integrated explanation and empirical analysis of the polarization of U.S. employment and wages between 1980 and 2005, and the concurrent growth of low skill service occupations. We attribute polarization to the interaction between consumer preferences, which favor variety over specialization, and the falling cost of automating routine, codifiable job tasks. Applying a spatial equilibrium model, we derive, test, and confirm four implications of this hypothesis. Local labor markets that were specialized in routine activities differentially adopted information technology, reallocated low skill labor into service occupations (employment polarization), experienced earnings growth at the tails of the distribution (wage polarization), and received inflows of skilled labor.

1,676 citations