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On The Impact Of Competition On Trade And Firm Location

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  • Toshihiro Okubo
  • Pierre M. Picard
  • Jacques-François Thisse

Abstract

type="main"> We study how the level of trade costs and the intensity of competition interact to explain the nature and intensity of trade within a given industry and the location of firms across countries. As trade costs decrease from very high to very low values, the global economy moves from autarky to two-way trade, through one-way trade from the larger to the smaller region. By exploring the intensive and extensive margins of exports, we investigate how the intensity of trade reacts to the degree of competitiveness. Furthermore, when firms are free to change location, they flow from the small to the large country, and the larger country is always a net exported on the manufactured good. Firms located in the big country have a bigger size than those located in the small one. Under one-way trade, the relocation of firms changes their attitude toward export.

Suggested Citation

  • Toshihiro Okubo & Pierre M. Picard & Jacques-François Thisse, 2014. "On The Impact Of Competition On Trade And Firm Location," Journal of Regional Science, Wiley Blackwell, vol. 54(5), pages 731-754, November.
    • Handle: RePEc:bla:jregsc:v:54:y:2014:i:5:p:731-754
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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