Class_New_Trade_Theory.pdf - Introduction 1/55 Product...

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Introduction Product classification Increasing returns Home Market E ff ect International Trade Theory How does Paul Krugman explain that Belgium export beers? Mathieu Parenti October 13th - November 17th 1/55
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Introduction Product classification Increasing returns Home Market E ff ect Table of contents Introduction Product classification Increasing returns An example (gains from trade) An example (continued: specialization) Theory Empirics Home Market E ff ect Theory 2/55
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Introduction Product classification Increasing returns Home Market E ff ect Intra-industry trade 3/55
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Introduction Product classification Increasing returns Home Market E ff ect Intra-industry trade At a first glance: main exports rely on skilled labor or high technology : OK with CA Among French main export destinations is .... Germany which is also exporting to France products in the same category: not OK with CA Hard to reconcile theories of trade under comparative advantage with intra-industry trade. Wait: what is an industry? 4/55
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Introduction Product classification Increasing returns Home Market E ff ect Intra-industry trade At a first glance: main exports rely on skilled labor or high technology : OK with CA Among French main export destinations is .... Germany which is also exporting to France products in the same category: not OK with CA Hard to reconcile theories of trade under comparative advantage with intra-industry trade. Wait: what is an industry? Group of goods which are substitutable. Has become the standard definition in theory Definition which holds to some extent in the data... which have the same factor intensities (Hecksher - Ohlin) Not equivalent: there is (a lot of) heterogeneity across firms in skill intensity within an industry (1st definition) 4/55
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Introduction Product classification Increasing returns Home Market E ff ect Trade in similar goods 5/55
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Introduction Product classification Increasing returns Home Market E ff ect Trade between similar countries 6/55
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Introduction Product classification Increasing returns Home Market E ff ect Intra-industry trade across time and industries 7/55
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Introduction Product classification Increasing returns Home Market E ff ect Caption Graphs taken from Brülhart (2009) Grubel - Lloyd (1975) GL i = 1 - | X i - M i | X i + M i Increasing over time. At all levels? But what is in the ’Motor and vehicles’ category? What if Germany exports trucks to France and France cars to Germany? Not a simple “aggregation e ff ect”: Chipman says that we would need 18-digit good clasification to rule out IIT Standard classification goes until 10 digit Not that intra-industry trade is observed between similar countries 8/55
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Introduction Product classification Increasing returns Home Market E ff ect Summary 9/55
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Introduction Product classification Increasing returns Home Market E ff ect Table of contents Introduction Product classification Increasing returns An example (gains from trade) An example (continued: specialization) Theory Empirics Home Market E ff ect Theory 10/55
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