Abstract

The theme of this talk is avoiding restrictive assumptions in economic modeling without sacrificing tractability. The first part of the talk is based on work with Takanori Adachi (Multidimensional Pass-Through and Welfare Measures under Oligopoly). It provides a substantial generalisation of the pass-through framework of Weyl & Fabinger (JPE 2013). We show how to incorporate arbitrary types of taxation and/or interventions, as well as firm heterogeneity, while keeping the economic relationships simple and transparent.

The second part of the talk is based on work with Glen Weyl (Functional Forms for Tractable Economic Models and the Cost Structure of International Trade). We show how to obtain closed-form solutions to economic models while relaxing assumptions such as constant-elasticity demand or constant marginal cost. We use these techniques to gain numerical tractability within a large-scale, computationally intensive model of global trade flows. Our results provide a solution to the long-standing trade cost puzzle of international trade: we can explain the observed rapid falloff of trade with distance without an unrealistically strong distance-dependence of trade costs.