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Fixed export cost heterogeneity, trade and welfare

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Author Info
Jørgensen, Jan G.
Schröder, Philipp J.H.

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Abstract

Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This paper presents a new and simple heterogeneous-firms specification. We develop a symmetric two-country intra-industry trade model where firms are of two different marginal cost types and where fixed export costs are heterogeneous across firms. This model traces many of the stylized facts of international trade. However, we find that with heterogeneous fixed export costs there exists a positive bilateral tariff that maximizes national and world welfare.

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File URL: http://www.sciencedirect.com/science/article/B6V64-4S03RJ3-1/2/42450dc3e738f3fb18ed729eaee62a14
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Publisher Info
Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 52 (2008)
Issue (Month): 7 (October)
Pages: 1256-1274
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Handle: RePEc:eee:eecrev:v:52:y:2008:i:7:p:1256-1274

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Web page: http://www.elsevier.com/locate/eer

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Related research
Keywords: Intra-industry trade Trade liberalization Monopolistic competition Heterogeneous firms Welfare Protectionism;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Schmitt, Nicolas & Yu, Zhihao, 2001. "Economies of scale and the volume of intra-industry trade," Economics Letters, Elsevier, vol. 74(1), pages 127-132, December. [Downloadable!] (restricted)
  2. Sébastien Jean, 2002. "International Trade and Firms' Heterogeneity under Monopolistic Competition," Open Economies Review, Springer, vol. 13(3), pages 291-311, July. [Downloadable!] (restricted)
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  3. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 917-937, July. [Downloadable!] (restricted)
  4. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September. [Downloadable!] (restricted)
  5. Jan Guldager Jørgensen & Philipp J. H. Schröder, 2006. "Tariffs and Firm-Level Heterogeneous Fixed Export Costs," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
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  6. Leonidas C Leonidou & Constatine S Katsikeas, 1996. "The Export Development Process: An Integrative Review of Empirical Models," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 27(3), pages 517-551, September. [Downloadable!] (restricted)
  7. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January. [Downloadable!] (restricted)
  8. Montagna, Catia, 2001. "Efficiency Gaps, Love of Variety and International Trade," Economica, London School of Economics and Political Science, vol. 68(269), pages 27-44, February. [Downloadable!] (restricted)
  9. Timothy J. Sturgeon, 2002. "Modular production networks: a new American model of industrial organization," Industrial and Corporate Change, Oxford University Press, vol. 11(3), pages 451-496, June.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Philipp J.H. Schröeder & Allan Sørensen, 2009. "Second Thoughts on Exporter Productivity," Economics Working Papers 2009-03, School of Economics and Management, University of Aarhus. [Downloadable!]
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