Topic：Trade, Technology, Size, and the Division of Labor
Speaker：Xu Yang，Xiamen University
Time：13:30-15:00
Date: April 8, 2019
Venue: Room 106B, Zhonghui Building

Abstract:
International trade increases the benefits to production specialization. In standard models this specialization occurs as production is re-allocated across firms with fixed technologies to explore economies of scale and comparative advantage. We examine the impact of international trade on welfare and the production structure when heterogeneous firms can adopt more specialized technologies---e.g. an assembly line using specialized inputs from other firms. In this setting, trade liberalization lowers the cost of intermediates and increases the return to specialized technologies, which implies a higher share of intermediates in trade and production, as well as a lower labor share---two features consistent with recent data. This firm specialization channel generates a larger trade elasticity, a larger intensive margin contribution to trade flows, and larger welfare gains from trade than standard trade models.