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Gabriel Felbermayr and Benjamin Jung
''Unilateral Trade Liberalization in the Melitz Model: A Note''
( 2012, Vol. 32 No.2 )
In the two-country Melitz (2003) model, unilateral trade liberalization is often cast as a reduction of iceberg transportation costs and wages are determined by a linear outside sector. We show that welfare results reverse when wages adjust and trade frictions are revenue-generating tariffs.
Keywords: Monopolistic Competition; Heterogeneous Firms; International Trade; Trade Policy
JEL: F1 - Trade: General
R1 - General Regional Economics (includes Regional Data)
Manuscript Received : Mar 28 2012 Manuscript Accepted : Jun 14 2012

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