Frédéric Robert-Nicoud

Trade and growth with heterogeneous firms

This paper explores the impact of trade on growth when firms are heterogeneous. We find that greater openness produces anti-and pro-growth effects. The Melitz-model selection effects raises the expected cost of introducing a new variety and this tends to slow the rate of new-variety introduction and hence growth. The pro-growth effect stems from the impact that freer trade has on the marginal cost of innovating. The balance of the two effects is ambiguous with the sign depending upon the exact nature of the innovation technology and its connection to international trade in goods and ideas. We consider five special cases (these include the Grossman-Helpman, the Coe- Helpman and Rivera-Batiz-Romer models) two of which suggest that trade harms growth; the others predicting the opposite.

Trade-in-Goods and Trade-in-Tasks: An Integrating Framework

We introduce a simple but flexible analytical framework in which both trade in goods and trade in tasks arise. We use this framework to provide versions of the gains-from-trade and the famous four HO theorems (Heckscher-Ohlin, factor-price-equalisation, Stolper-Samuelson, and Rybczynski) that apply to this environment. We extend our framework to accommodate monopolistic competition and two-way offshoring and to integrate theoretical results of the early offshoring literature.

Productive Cities: Sorting, Selection, and Agglomeration

Large cities produce more output per capita than small cities. This higher productivity may occur because more talented individuals sort into large cities, because large cities select more productive entrepreneurs and firms, or because of agglomeration economies. We develop a model of systems of cities that combines all three elements and suggests interesting complementarities between them. The model can replicate stylized facts about sorting, agglomeration, and selection in cities. It also generates Zipf’s law for cities under empirically plausible parameter values. Finally, it provides a useful framework within which to reinterpret extant empirical evidence.

Free trade agreements without delocation

Small nations fear that FTAs with larger, richer nations will erode their industrial bases. These concerns are recognized in FTA and multilateral talks: small nations may explicitly or implicitly maintain higher trade barriers. Using a model where symmetric liberalization de-industrializes small, poor nations, we characterize the path of protection-asymmetries that allow liberalization without delocation. In welfare terms, the large nation prefers this no-delocation liberalization scheme only when barriers are sufficiently high; the small nations ranking is reversed. An anti-delocation scheme involving international income transfers is also evaluated and found infeasible.

Home-market vs. vote-market effect: Location equilibrium in a probabilistic voting model

Abstract This paper considers the location of manufacturing activities when regional policies are endogenous. We find that once the political economy of regional policy is explicitly taken into account, regional population size has an ambiguous effect on the level of regional subsidy, even though it plays a key role in determining the equilibrium spatial allocation of industry. In particular, the final allocation of firms depends both on the relative economic strengths of the two regions, as predicted by more orthodox economic geography models, as well as by their relative political strengths.

The core-periphery model: key features and effects

More than 25 years ago, Avinash Dixit and Joe Stiglitz developed a simple model for addressing imperfect competition and increasing returns (ICIR) in a general equilibrium setting. Its first application, in Dixit and Stiglitz (1977), was to an issue that now seems rather banal – whether the free markets produces too many or too few varieties of differentiated products. But ICIR considerations are so crucial to so many economic phenomena, and yet so difficult to model formally, that the Dixit-Stiglitz framework has become the workhorse of many branches of economics. In this paper, we present one of its most recent, and most startling applications – namely, to issues of economic geography. While there are many models in this new literature, almost all of them rely on Dixit-Stiglitz monopolistic competition, and among these, the most famous is the so-called core-periphery model introduced by Paul Krugman in a 1991 paper. The basic structure of the core-periphery (CP) model is astoundingly familiar to trade economists. Take the classroom Dixit-Stigliz monopolistic-competition trade model with trade costs, add in migration driven by real wage differences, impose a handful of normalisations, and voila, the CP model! The fascination of the CP model stems in no small part from the fact that these seemingly innocuous changes so unexpectedly and so radically transform the behaviour of a model that trade theorists have been exercising for more than 25 years.

Tempora Mutantur: In Search of a New Testament for NEG

The aim of this article is twofold. First, we present an integrative framework that encompasses a large share of existing neg models. This framework allows us to discuss the fundamental assumptions and the key results that hold throughout a broad class of models. We argue that progress within the straight-jacket of that framework, though potentially important, is unlikely to produce path-breaking new insights. Second, we suggest that there are potentially large payoffs to stepping outside of the established framework and to extend the neg approach into various directions that have to date received only scant attention. Heterogeneity, cities, transportation, and calibration are avenues along which neg needs to make progress in the future.