Miklós Koren publishes in Quarterly Journal of Economics

February 26, 2020

The paper Diversification through Trade co-authored by Professor Miklós Koren has been published in the February issue of the Quarterly Journal of Economics.

Quarterly Journal of Economics is the top-ranked journal in economics with an impact factor of 11.775. It is one of 33 World Elite 4* journals in the CABS Academic Journal Guide, and one of 50 journals used in the Financial Times Research Rank.

A widely held view is that openness to international trade leads to higher income volatility, as trade increases specialization and hence exposure to sector-specific shocks. Contrary to this common wisdom, we argue that when country-wide shocks are important, openness to international trade can lower income volatility by reducing exposure to domestic shocks and allowing countries to diversify the sources of demand and supply across countries. Using a quantitative model of trade, we assess the importance of the two mechanisms (sectoral specialization and cross-country diversification) and show that in recent decades international trade has reduced economic volatility for most countries.