Functional Forms for Tractable Economic Models and the Cost Structure of International Trade

61 Pages Posted: 26 Sep 2018

See all articles by Michal Fabinger

Michal Fabinger

University of Tokyo - Graduate School of Economics

E. Glen Weyl

Plural Technology Collaboratory, Microsoft Research Special Projects; Plurality Institute; GETTING-Plurality Research Network

Date Written: August 17, 2018

Abstract

We present functional forms allowing a broader range of analytic solutions to common economic equilibrium problems. These can increase the realism of pen-and-paper solutions or speed large-scale numerical solutions as computational subroutines. We use the latter approach to build a tractable heterogeneous firm model of international trade accommodating economies of scale in export and diseconomies of scale in production, providing a natural, unified solution to several puzzles concerning trade costs. We briefly highlight applications in a range of other fields. Our method of generating analytic solutions is a discrete approximation to a logarithmically modified Laplace transform of equilibrium conditions. Supplementary material for this paper is available at the following URL: http://ssrn.com/abstract=2575471

Keywords: Tractability, closed-form solutions, Laplace transform, international trade, trade cost puzzle, supply-chain bargaining, labor bargaining, monopolistic competition

JEL Classification: C63, C68, D40, D58, E24, F11, H22, L10

Suggested Citation

Fabinger, Michal and Weyl, Eric Glen, Functional Forms for Tractable Economic Models and the Cost Structure of International Trade (August 17, 2018). Available at SSRN: https://ssrn.com/abstract=2194855 or http://dx.doi.org/10.2139/ssrn.2194855

Michal Fabinger

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

HOME PAGE: http://sites.google.com/site/fabinger/

Eric Glen Weyl (Contact Author)

Plural Technology Collaboratory, Microsoft Research Special Projects ( email )

11 Ellsworth Ave, #2
Cambridge, MA 02139
United States
8579984513 (Phone)

HOME PAGE: http://www.glenweyl.com

Plurality Institute ( email )

GETTING-Plurality Research Network ( email )

124 Mount Auburn Street
Suite 520N
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,978
Abstract Views
8,521
Rank
15,111
PlumX Metrics