New trade models with different distributions

Abstract

In this thesis, we estimate the Ricardian trade model of Eaton and Kortum (2002) using a different extreme value distribution for the productivity distributions of countries. Due to its analytical convenience, it is now a common tradition in international trade literature to assume that the distribution of productivities follows a Fr´echet distribution, which is the case for Eaton and Kortum (2002) model as well. However, recent studies have shown that the estimation results are sensitive to this parametrization. In view of this, we estimate the Eaton and Kortum (2002) model where Weibull distribution is used for the distribution of productivities and show that estimated results change when we use another distribution.