DP9398 | Trade Theory with Numbers: Quantifying the Consequences of Globalization

Publication Date

17/03/2013

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Abstract

We review a recent body of theoretical work that aims to put numbers on the consequences of globalization. A unifying theme of our survey is methodological. We rely on gravity models and demonstrate how they can be used for counterfactual analysis. We highlight how various economic considerations---market structure, firm-level heterogeneity, multiple sectors, intermediate goods, and multiple factors of production---affect the magnitude of the gains from trade liberalization. We conclude by discussing a number of outstanding issues in the literature as well as alternative approaches for quantifying the consequences of globalization.