Trade and Employment From Myths to Facts - International Labour ...

Chapter 7: Trade diversification: Drivers and impacts
where Δ denote a period-to-period change. That is, given our partition, the between-groups
component measures changes at the extensive margin.
As for the “within-groups” component, it is a weighted average of terms combining
group-specific means and group-specific Theil indices T j . In group G 0 (inactive
lines), again μ 0 = T 0 = 0 ; so, in our case, T W reduces to T 1 , the group Theil index
for active lines. Thus, given our partition, changes in the within-groups Theil
index measure changes at the intensive margin.
7.A.2.2 Hummels and Klenow margins
Let be the value of country i’s exports of good k, and the world’s exports of
that good; let also stand for the group of country i’s active export lines. The
intensive margin (IM i
) and extensive margin (EM i
χκ χκ G1 ), for country i, are defined as
7.A.3 Brenton and Newfarmer margins
Let again G1 be the set of goods exported by country i to any destination,
G1 be the set of goods exported by i to destination country j, and M1 the set of
goods imported by destination country j from any origin. Based on these groups,
define binary variables
ij
i
and
j
mk =
i
⎧⎪
⎨
⎩⎪
i
j
1 if k ∈M 1
0 otherwise.
Brenton and Newfarmer’s index for country i is then
(7)
W
j
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