This paper examines a simple model of outsourcing involving matching frictions and home bias in firms’ acquisition of intermediate goods. Two groups of seller firms—local sellers and foreign sellers—may face different degrees of search frictions even though they are identical in terms of productivity. Two groups of buyer firms are considered: one group accepts local and foreign sellers equally,...

This paper studies empirically the relationship between trade policy and individual income risk faced by workers. The analysis proceeds in three steps. First, longitudinal data on workers are used to estimate time-varying individual income risk parameters in various manufacturing sectors. The estimated income risk parameters and data on trade barriers are then used to analyze the relationship b...

An Empirical Analysis of Trade-Related Redistribution and the Political Viability of Free Trade Even if free trade creates net welfare gains for a country as a whole, the associated distributional implications can undermine the political viability of free trade. We show that trade-related redistribution increases the political viability of free trade in the US. We do so by assessing the causal ...

We investigate a mechanism whereby a group of nations forming a free trade area simultaneously can efficiently satisfy industrialization targets. The mechanism does not rely on cross-country transfers, and it is efficient for each member country individually even if other members of the free trade area do not implement the efficient policy. It allows each member country to gain from participati...

The paper evaluates the effect of the FAMEX export promotion program in Tunisia on the export performance of beneficiary firms using firm-level data. Propensity-score matching difference-indifference and weighted least squares estimates suggest that beneficiaries expand at the intensive and the extensive margin (markets and products). However, this expansion is short-lived for total exports. Ou...

This paper indicates that the consequences of regional trade agreements for the world trade system may be deceiving—an arrangement’s apparent virtue may constitute the source of its drawback. In a model where governments have political, as well as economic, motivations, I show that a free trade area induces its members to reduce protection against the non-members, and to do so sufficiently deep...

The paper has three purposes. First, it explains how the impact of liberalization of service sectors on output growth differs from that of liberalization of trade in goods. Second, it suggests a policy-based rather than outcome-based measure of the openness of a country’s services regime. Such openness measures are constructed for two key service sectors, basic telecommunications and financial ...

Hub-and-Spoke Free Trade Areas* This paper analyzes how the sequential formation of free trade areas affects the volume of trade between member countries. In a three--country, three-good model, if two countries have a free trade area, and both sign a similar agreement with the third, trade between the two decreases, and welfare rises in both. However, if only one of them signs an FTA with the t...

In this paper, we analyze the issue of optimal tariffs when the Northern and Southern firms compete in quantities in an imperfectly competitive Northern market and there are Ž . potentially varying degrees of intellectual property rights IPR violation by the South. IPR Ž . violation is reflected through the leakage of technological knowledge ‘‘spillovers’’ from the Northern to the Southern firm...

This paper evaluates the impact of the positive terms of trade (TOT) Shock on macroeconomic variables, using panel data for the six OPEC major oil exporting countries during 1989-2005. The findings indicate that the positive TOT shocks have the small and negative impact on savings and on the trade balance. Nevertheless, it has a positive impact on investment (specifically private investment) an...