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https://doi.org/10.3386/w5051

has been cited by the following article:

• TITLE: Ricardo Revisited: Benefits from Trade and the Role of Non-Convex Technologies

  AUTHORS: Jean-Paul Chavas, Taylor Hall

  KEYWORDS: Ricardo, Globalization, Gains from Trade, Non-Convexity

  JOURNAL NAME: Theoretical Economics Letters, Vol.7 No.2, February 28, 2017

  ABSTRACT: This paper explores the aggregate gains from trade with a focus on the role of non-convexity. After reviewing the example presented by Ricardo, we develop a general equilibrium model of trade under non-convex technologies and heterogeneous firms. The model is used to evaluate aggregate efficiency, with a focus on the case where trade restrictions are the only source of inefficiency. The analysis allows for non-linear pricing which becomes an integral part of efficiency under non-convex technologies. We establish bounds on the gains from trade. We show that the gains from trade are non-negative and that they tend to be small under convexity but can become large under non-convexity. This indicates that the search for larger gains from trade needs to be associated with non-convex technologies. Implications of our analysis for the benefits of globalization are discussed.