Kristian Behrens

Trade Crisis? What Trade Crisis?

We investigate the 20082009 trade collapse using microdata from a small open economy, Belgium. Belgian exports and imports mostly fell because of smaller quantities sold and unit prices charged rather than fewer firms, trading partners, and products being involved in trade. Our difference-in-difference results point to a fall in the demand for tradables as the main driver of the collapse. Finance and involvement in global value chains played a minor role. Firm-level exports-to-turnover and imports-to-intermediates ratios reveal a comparable collapse of domestic and cross-border operations. Overall, our results reject a crisis of cross-border trade per se.

Changes in Transport and Non Transport Costs: Local vs. Global Impacts in a Spatial Network

We develop a multi-country Dixit-Stiglitz trade model and analyze how industry location and welfare respond to changes in: (i) transport frictions (e.g., infrastructure, transportation technology); and (ii) non-transport frictions (e.g., tariffs, standards and regulations). We show that changes in non-transport frictions, which are usually origin-destination specific, do not allow for any clear prediction as to changes in industry location and welfare; whereas changes in transport frictions, which are usually not origin-destination specific, may allow for such predictions. In particular, we show that reductions in transport frictions occurring at links around which the spatial network is locally a tree are Pareto welfare improving.

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.

International Integration and Regional Inequalities: How Important is National Infrastructure?

We investigate how international trade and trade policy possibly affect the regional distribution of economic activities within a country involved in a process of economic integration. Our analysis reveals that the impact of decreasing international trade costs on the spatial distribution of economic activities strongly depends on the structure of trade flows and the value of transport costs internal to the country. Whereas trade liberalization in developing countries with poor infrastructure and mostly autarkic regions may exacerbate spatial inequalities, countries with better infrastructure and larger volumes ofinterregional trade may experience a more balanced geographical development.

Agglomeration Theory with Heterogeneous Agents

This chapter surveys recent developments in agglomeration theory within a unifying framework. We highlight how locational fundamentals, agglomeration economies, the spatial sorting of heterogeneous agents, and selection effects affect the size, productivity, composition, and inequality of cities, as well as their size distribution in the urban system.

On the Location and 'Lock-In' of Cities: Geography vs. Transportation Technology

We investigate the roles of natural transportation hubs and transportation technology in determining where a city is located and why it tends to stay put where it is. Building on the continuous spatial model by Fujita and Krugman [Fujita, M. and Krugman, P., 1995, When is the economy monocentric: Von Thunen and Chamberlin unified, Regional Science and Urban Economics 25, 505–528.], we show, on the one hand, that only some transportation technologies allow for asymmetric city locations to be sustained as equilibria in the absence of transportation hubs. On the other hand, asymmetric locations can be sustained as equilibria over a large range of parameter values for a wide range of transportation technologies in the presence of such hubs.

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.

TRADE, WAGES, AND PRODUCTIVITY: TRADE, WAGES, AND PRODUCTIVITY

We develop a general equilibrium monopolistic competition model in which wages, productivity, consumption diversity, and markups respond to trade integration. We structurally estimate the model and simulate the impacts of removing all trade barriers generated by the Canada–U.S. border. Firm selection gets tougher by 8.09% in Canada and by 0.80% in the United States. Markups that consumers face, which are central to welfare, fall by up to 12.11% in Canadian provinces and by up to 2.82% in U.S. states. However, changes in markups measured at the firm level are ambiguous, thus providing a different piece of information.

Industry reallocations in a globalizing economy

Industry reallocations in a globalizing economy - We present the main insights from recent developments in New Trade Theory (NTT) on firms’ responses to globalisation and their implications for the reallocation of resources across firms and countries. In so doing, we do not want to propose a survey of the major contributions to NTT. We prefer, instead, to propose a simple twocountry partial equilibrium model that highlights the key features of NTT while bypassing most of its complexities. Both exports and foreign direct investment (henceforth, FDI) are considered, which makes the model also a useful pedagogical tool. Keywords: international integration; resource reallocation; economic geography; firm heterogeneity; multinationals. JEL Classification: F12

Welfare, home market effects, and horizontal foreign direct investment

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