Xavier Jaravel, Erick Sager, 16 October 2019

International trade creates both winners and losers. Using comprehensive price data, this column estimates the US price effects of the China shock from 2000 to 2007. It finds that US consumers benefited from large price declines in product categories in which imports from China increased, as increased trade with China eroded the market power of US producers. The positive impact of the China shock on the purchasing power of US consumers is large in comparison to its negative impact on US jobs.

Lorenzo Caliendo, Robert Feenstra, John Romalis, Alan M. Taylor, 26 April 2017

Tariff barriers today are small on average, suggesting only limited welfare gains from their removal. This column argues, however, that the current generation of standard trade models have missed an important source of gains from trade by neglecting the more complex case of a world with production linkages and multiple sectors. Under monopolistic competition, the effects of firm entry may be so powerful, that optimal tariffs are not positive but negative. Even the removal of small positive tariffs could thus produce significant welfare gains.

Events

CEPR Policy Research