Costas Arkolakis awarded a National Science Foundation CAREER grant 2013-2018

Welfare Gains from Economic Integration: A Unified Approach: The international trade field has seen a dramatic shift of its research agenda over the past decade that motivated the modeling of firm heterogeneity and resulted in a new analytical framework. These changes in the field have also lead to a reconsideration of the old pressing question: how large are the gains from economic integration? The proposal develops a unified framework to analyze the main forces that shape the gains from economic integration and it is composed of four different research projects. The first two projects develop a unified framework to characterize the gains from economic integration and the impact of innovation on trade in a model with variable markups and pro-competitive effects of trade. The third project develops an extension of a baseline trade framework that can seamlessly accommodate production of multinational firms and provide a new analytical tool for the understanding of the gains from multinational activity. The final project will attempt to strengthen the tenuous link between dynamic open economy models and static trade models by developing a multi-country trade model that incorporates the fact that trade adjustment may take time.