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Essay Details:
Essay text:
This microeconomic structure endogenously determines the
extent of the traded sector and the composition of consumption baskets in both countries. Exogenous
shocks to aggregate productivity, sunken entry costs, and trade costs induce firms to enter and exit both
their domestic and export markets, thus altering the composition of consumption baskets across countries
over time1. The microeconomic features have important consequences for macroeconomic variables.
Macroeconomic dynamics, in turn, feed back into firm level decisions, further altering the pattern of
trade over time. The aggregate picture of world economic growth shows a remarkable diversity in growth performance, both geographically and across time...
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