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Open Access

Variety Gains from Trade in Switzerland

Swiss Journal of Economics and Statistics2011147:BF03399341

https://doi.org/10.1007/BF03399341

Published: 26 December 2011

Summary

Since the seminal work of Krugman (1979), variety gains from trade are recognized as an important channel of welfare gains. In this paper, the gains from variety are estimated for Switzerland. It is found that despite the openness of the Swiss economy these gains are not substantial and smaller than in other countries; specifically compared to the gains in the United States. It is shown that the reasons for this result are twofold: First, the Swiss imports are shown not to be as differentiated as their U.S. counterparts; consequently, new varieties do not provide the same value to consumers. Second, variety growth of imports in Switzerland is much smaller compared to variety growth in larger countries. It is furthermore shown that this latter effect is quantitatively more important than the first.

JEL-Classification

F10F12F14

Keywords

welfare gains from tradetrade in varietysmall open economy

Notes

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