Code for: Inventories, Integration, Productivity, and Welfare
Principal Investigator(s): View help for Principal Investigator(s) George Alessandria, University of Rochester; Shafaat Yar Khan, Syracuse University; Armen Khederlarian, CUNY Hunter College
Version: View help for Version V1
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Project Citation:
Alessandria, George, Khan, Shafaat Yar, and Khederlarian, Armen . Code for: Inventories, Integration, Productivity, and Welfare. Nashville, TN: American Economic Association [publisher], 2025. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2025-05-20. https://doi.org/10.3886/E230121V1
Project Description
Summary:
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Trade barriers introduce logistical frictions that shape inventory management decisions, yet they are often reduced to simple iceberg costs in trade models. We extend a general equilibrium inventory framework to incorporate tariffs and delivery frictions, showing that firms hold more inventory when international frictions are high. Our model reveals that reducing these barriers leads to greater efficiency gains than conventional trade models predict, with an 8% higher long-run consumption increase. Anticipatory effects ahead of tariff changes drive pronounced boom-and-bust cycles in trade and economic activity, mirroring past policy shifts.
Scope of Project
JEL Classification:
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F11 Neoclassical Models of Trade
F11 Neoclassical Models of Trade
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