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GTAP Resources: Resource Display

GTAP Resource #6219

"Mathematics of Generalized Versions of the Melitz, Krugman and Armington Models with Detailed Derivations"
by Balistreri, Edward J. and David G. Tarr

We provide detailed textbook style mathematical derivations of an extended version of the heterogenous firms model of Melitz (2003), as well as the Armington (1969) and Krugman (1980) models. Our model of heterogeneous firms extends the model of Melitz (2003) by allowing multiple sectors, intermediates, heterogeneous regions based on data, labor-leisure choice, initial heterogeneous tariffs as well as iceberg trade costs, multiple factors of production, the possibility of sector-specific inputs and trade balances based on data. In addition to policy shocks based on iceberg trade costs, we also incorporate global and unilateral tariff policy shocks. We provide detailed derivations of all these extensions. Despite the fact that the models in this paper are extensions in numerous directions of the basic international trade model of heterogeneous firms, the pedagogical approach in this paper should substantially facilitate the accessibility of the applied heterogenous-firms model of international trade for students and reviewers. Balistreri and Tarr (2020) apply these models to data where they assess the relative welfare impacts of trade cost reductions. This paper documents the equations of those models and we hope it will be a clear roadmap for understanding and constructing modern multi-sector, multi-region international trade models that must be fitted to data.

Resource Details (Export Citation) GTAP Keywords
Category: 2021 Conference Paper
Status: Not published
By/In: Presented during the 24th Annual Conference on Global Economic Analysis (Virtual Conference)
Date: 2021
Version: 1
Created: Tarr, D. (4/8/2021)
Updated: Tarr, D. (6/22/2021)
Visits: 929
- Baseline development
- Multilateral trade negotiations
- Non-Tariff barriers
- Other data bases and data issues
- Not Applicable

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