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Product Variety and the Gains from International Trade$
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Robert C. Feenstra

Print publication date: 2010

Print ISBN-13: 9780262062800

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262062800.001.0001

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Consumer Benefits from Import Variety

Consumer Benefits from Import Variety

(p.7) 2 Consumer Benefits from Import Variety
Product Variety and the Gains from International Trade

Robert C. Feenstra

The MIT Press

This chapter examines methods for the measurement of consumer benefits from import variety. It addresses the poor empirical estimates for the elasticity by adopting a constant elasticity of substitution (CES) utility function and derives an expression for the welfare gain from new products by determining how new goods affect the cost of living index. It also provides a calculation of the worldwide gain from trade using data from the Penn World Table.

Keywords:   consumer benefits, import variety, elasticity, CES utility function, welfare gain, cost of living index, worldwide gain, Penn World Table

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