《New Trade Models》.pdf

American Economic Review 2012, 102(1): 94–130 /10.1257/aer.102.1.94 New Trade Models, Same Old Gains?† By Costas Arkolakis, Arnaud Costinot, and Andrés Rodríguez-Clare* Micro-level data have had a profound influence on research in inter- national trade over the last ten years. In many regards, this research agenda has been very successful. New stylized facts have been uncov- ered and new trade models have been developed to explain these facts. In this paper we investigate to what extent answers to new micro-level questions have affected answers to an old and central question in the field: how large are the welfare gains from trade? A crude summary of our results is: “So far, not much.” (JEL F11, F12) What share of firms export? How large are exporters? How many products do they export? Over the last ten years, micro-level data have allowed trade economists to shed light on these and other micro-level questions. The objective of our paper is to look back at this research agenda and investigate to what extent answers to new micro-level questions have affected our answers to an old and central question in international trade: how large are the welfare gains from trade? A crude summary of our results is: “So far, not much.” The main contribution of our paper is to demonstrate that, independent of their micro-level implications, the welfare predictions of an important class of trade mod- els depend on only two sufficient statistics: (i) the share of expenditure on domes- tic goods, λ, which is equal to one minus the import penetration ratio; and (ii) an elasticity of imports with respect to variable trade costs, ε, which we refer to as the “trade elasticity.” For