Optimal Tariff Theory: When a Tariff Can Make a Large Country Better Off
Optimal tariff theory is the exception to the free-trade rule. A large country can raise its welfare by taxing imports,...
International Trade and Economics
Explore the world of international trade and economics with our expert articles
Trade in Tasks and Offshoring
Countries no longer trade only finished goods but the tasks that make them. The Grossman-Rossi-Hansberg model, and what offshoring does...
The Melitz Model of Trade
Only the most productive firms export, because exporting has a fixed cost. How trade reallocates output toward them and raises...
The Balassa-Samuelson Effect
Prices are higher in rich countries because high tradable productivity lifts wages everywhere, including in services that never got more...
The Dornbusch Overshooting Model
Prices are sticky, so a monetary shock pushes the exchange rate past its long-run value before it settles back. That...
The J-Curve Effect Explained
A devaluation raises import prices at once but takes months to lift export volumes, so the trade balance falls before...
The Marshall-Lerner Condition
A devaluation improves the trade balance only if export and import demand elasticities sum to more than one. Why it...
New Trade Theory: Why Big Markets Win
New trade theory explains why similar countries trade similar goods. Economies of scale and love of variety, not comparative advantage,...
The Nordic Model Explained
How Denmark, Sweden, Norway and Finland combine high taxes and a large welfare state with competitive economies, low inequality and...
Digital Trade: Data Flows and the Rules
Digital trade reached $7.23 trillion in 2024, growing at twice the pace of goods trade. The WTO moratorium has lapsed...