Handbook of International Economics

Chapter 4

Trade Theory with Numbers: Quantifying the Consequences of Globalization*

Arnaud Costinot^{a, b} and Andrés Rodríguez-Clare^{b, c},    ^aMassachusetts Institute of Technology, Cambridge, MA, USA, ^bNational Bureau of Economic Research, Cambridge, MA, USA, ^cUniversity of California, Berkeley, CA, USA

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 ...