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Trade in variety and domestic production: Evidence from US manufacturing
Author(s) -
Lewrick Ulf,
Mohler Lukas,
Weder Rolf
Publication year - 2016
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12246
Subject(s) - variety (cybernetics) , production (economics) , product (mathematics) , economics , welfare , business , international trade , industrial organization , microeconomics , computer science , market economy , mathematics , geometry , artificial intelligence
Abstract Welfare gains from increasing product variety are an important source of the gains from international trade. Previous empirical studies, however, typically focus on measuring gains from imported varieties. This paper introduces a measure to analyze changes in domestically produced varieties to estimate the total variety gains. Our analysis suggests that, for US manufacturing, losses in domestic varieties from 1992 to 2006 seem substantial given the large decline in the number of US establishments. Yet, once we account for the reallocation of resources towards large multi‐variety firms, we find considerable domestic variety gains, adding to those from imported varieties.