Discussion Papers 2018
CIRJE-F-1092 | "Functional Forms for Tractable Economic Model and the Cost Structure of International Trade" |
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Author Name | Fabinger, Michal and E. Glen Weyl |
Date | August 2018 |
Full Paper | |
Remarks | Revised version of CIRJE-F-1028 (2016). |
Abstract |
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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. |