2017 Fiscal Year Research-status Report
External Economies and International Trade: A Quantitative Framework
| Project/Area Number |
17K13721
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| Research Institution | The University of Tokyo |
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Principal Investigator |
クチェリャヴィ コンスタンティン 東京大学, 大学院経済学研究科(経済学部), 特任講師 (30774153)
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| Project Period (FY) |
2017-04-01 – 2020-03-31
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| Keywords | international trade / gravity models / economies of scale / business cycles |
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| Outline of Annual Research Achievements |
The objective of the research is (i) to develop a quantitative model of international trade which features multiple countries, multiple industries, and industry-level external economies of scale (Marshallian externalities); (ii) to use the model to analyze effects of trade policy on country-industry-level productivities and trade. Our main research achievements are as follows:
First, we finished the construction of the model and proved a number of important theoretical results. Namely, we showed that the model has a unique equilibrium in several important special cases and we showed that within our environment all countries gain from trade, which is an important contribution to the literature. Moreover, we showed that the workhorse models of international trade that are used for policy analyses (Krugman and Melitz models) are isomorphic to our model. Thus, our theoretical results for uniqueness are applied to these models.
Second, we used our model to quantify the effects of the presence external economies of scale on trade flows and welfare. Namely, we employed real-world data and showed that the presence of external economies of scale magnifies gains from tariff reductions for countries that specialize in industries with strong external economies of scale.
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| Current Status of Research Progress |
Current Status of Research Progress
2: Research has progressed on the whole more than it was originally planned.
Reason
We submitted the current version of our draft to a peer-reviewed journal. Several professors in the US (including Gene Grossman of Princeton University and Jonathan Eaton of Penn State University) have already started teaching our paper in their PhD level-courses on International Trade. We started working on extensions of our results to a dynamic setting with capital accumulation. We have already released a version of our draft and we are scheduled to present it at at least four conferences: 18th Society for the Advancement of Economic Theory in Taiwan, 2018 Society for Economic Dynamics in Mexico, 2018 North American Summer Meeting in the US, and 71st European Meeting of the Econometric Society in Germany.
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| Strategy for Future Research Activity |
During the second year of our project we plan to work more on the dynamic version of our paper. We will be presenting it and incorporating feedback that we receive at presentations. At this point we have the theoretical part of our dynamic model finished, and we plan to work on the empirical part: estimation of parameters of the model.
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| Causes of Carryover |
In the previous year we were not traveling. The saved money from the previous year will be used for traveling and presenting our work in the coming year.
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