Seminar Vol. 137

Title: Trade, Technology, Size, and the Division of Labor

Speaker: Yang Xu, Xiamen University

Time: April 8th, 2019 13:30–15:00

Venue: Conference Room 106B, Zhonghui Building (IESR, JNU College of Economics)

About the speaker:

Yang Xu is an Assistant Professor at the School of Economics and Wang Yanan Institute for Studies in Economics, Xiamen University. He earned a Ph.D. in Economics from the University of Maryland, the U.S. in 2017. Yang Xu's main research areas are international trade and economic structure. 

Abstract:

International trade increases the benefits to production specialization. In standard models this specialization occurs as production is re-allocated across firms with fixed technologies to explore economies of scale and comparative advantage. We examine the impact of international trade on welfare and the production structure when heterogeneous firms can adopt more specialized technologies – e.g. an assembly line using specialized inputs from other firms. In this setting, trade liberalization lowers the cost of intermediates and increases the return to specialized technologies, which implies a higher share of intermediates in trade and production, as well as a lower labor share – two features consistent with recent data. This firm specialization channel generates a larger trade elasticity, a larger intensive margin contribution to trade flows, and larger welfare gains from trade than standard trade models.