https://macropaperwarehouse.com/authors/ana-cecilia-fieler/Ana Cecília FielerHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/the-margins-of-trade/https://macropaperwarehouse.com/papers/the-margins-of-trade/<p><strong>Research Question</strong></p> <p>Eaton and Fieler seek to reconcile two literatures that have advanced in parallel but remained at odds: (i) general equilibrium models of bilateral trade flows (the &ldquo;gravity&rdquo; tradition) and (ii) empirical work on the margins of trade — the decomposition of bilateral trade into the extensive margin (number of products traded), the quantity margin (physical volumes), and the unit-value (price) margin. Standard GE models cannot accommodate two of the most robust empirical regularities: that richer importing countries pay higher unit values for the same product, and that richer exporting countries charge higher unit values. The paper builds a framework that captures all three margins jointly while still delivering the standard gravity equation and the Arkolakis-Costinot-Rodriguez-Clare (ACR) welfare formula.</p>