Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Mar, 2024, Volume 92, Issue 2

Networks, Barriers, and Trade
p. 505-541

David Rezza Baqaee, Emmanuel Farhi

We study a flexible class of trade models with international production networks and arbitrary wedge‐like distortions like markups, tariffs, or nominal rigidities. We characterize the general equilibrium response of variables to shocks in terms of microeconomic statistics. Our results are useful for decomposing the sources of real GDP and welfare growth, and for computing counterfactuals. Using the same set of microeconomic sufficient statistics, we also characterize societal losses from increases in tariffs and iceberg trade costs and dissect the qualitative and quantitative importance of accounting for disaggregated details. Our results, which can be used to compute approximate and exact counterfactuals, provide an analytical toolbox for studying large‐scale trade models and help to bridge the gap between computation and theory.

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Supplemental Material

Supplement to "Networks, Barriers, and Trade"

David Rezza Baqaee and Emmanuel Farhi

The replication package for this paper is available at The Journal checked the data and codes included in the package for their ability to reproduce the results in the paper and approved online appendices.

Supplement to "Networks, Barriers, and Trade"

David Rezza Baqaee and Emmanuel Farhi

This supplemental appendix contains material not found within the manuscript.