Structural Estimation of Variety Gains from Trade Integration in Asia |
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| Authors: | D’Artis Kancs |
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| Institution: | 1. Directorate General Joint Research Centre, European Commission;2. Catholic University of Leuven;3. and Economics and Econometrics Research Institute;4. The author acknowledges helpful comments from Christian Hepenstrick, Joep Konings, Damiaan Persyn, Sandra Poncet, Veerle Slootmaekers, Jan Van Hove, Dirk Willenbockel, Ross Williams, Fan Zhai, workshop participants at ‘Firm and Product Heterogeneity in International Trade’ in Brussels and GTAP conference participants in Malaysia. The author is grateful to the editor and anonymous reviewers for their truly helpful comments. The author is extremely grateful to Joep Konings for providing the ORIANA firm‐level data for Asia. The views expressed are purely those of the author and may not in any circumstances be regarded as stating an official position of the European Commission. |
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| Abstract: | This article studies the variety gains of trade integration in Asia. Adopting a heterogeneous firm model of trade of monopolistic competition allowed us to estimate not only the welfare gains because of country specialisation, but also the variety gains arising from trade integration. The underlying structural parameters were estimated econometrically, based on a large panel of firm‐level data for the Asian economies (ORIANA). Our empirical findings suggest that, when relaxing the assumption of firm homogeneity and accounting for export market entry costs, the gains from trade integration are higher than in conventional models with representative firms. |
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