Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Laurence Wicht
Author-Name-First: Laurence
Author-Name-Last: Wicht
Author-Person: pwi459
Title: The margin of importing sectors in the gains from trade
Abstract: A common assumption in the quantitative Ricardian international trade literature is that within a country, import shares are equalized across sectors. This assumption is at odds with the data, which show within-country heterogeneity in sectoral import behavior. I build a multi-country, multi-sector general equilibrium Ricardian trade model, in which I include a new extensive and intensive international trade margin at the importing sector level. Counterfactual analysis shows that accounting for within-country sector-specific import behavior is significant for the level of welfare gains from trade. Calibrations based on two cross-country data sources show that a benchmark Ricardian model with equalized import shares across sectors underestimates welfare gains from trade by 13 to 24% on average compared to the model accounting for within-country sectoral import patterns. The benchmark model underestimates the productivity gains of sectors which account for most country-level imports and the spillovers of their productivity gains on other sectors through sectoral linkages.
Length: 50 pages
Creation-Date: 2020
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2020/working_paper_2020_07
File-Format: text/html
Number: 2020-07
Classification-JEL: F10, F11, F14
Keywords: Gains from trade, sectoral imports, proportionality assumption
Handle: RePEc:snb:snbwpa:2020-07