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Multidivisional firms, internal competition, and comparative advantage: Baye et al. Meet Neary

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  • Beladi, Hamid
  • Chakrabarti, Avik

Abstract

We present a tractable general equilibrium model to capture the effects of divisionalization on trade in oligopolistic industries. Divisionalization reduces the incentives for diversification in production. The extensive margins of trade expand as a result of divisionalization, facilitating specialization toward the direction of comparative advantage, with exports rising in the case of domestic divisionalization and imports rising in the case of foreign divisionalization. This effect of internal competition on specialization is magnified when competition between divisions is staggered. The factor market effects of divisionalization, domestic and/or foreign, strengthen the expansionary effects on the extensive margins of trade.

Suggested Citation

  • Beladi, Hamid & Chakrabarti, Avik, 2019. "Multidivisional firms, internal competition, and comparative advantage: Baye et al. Meet Neary," Journal of International Economics, Elsevier, vol. 116(C), pages 50-57.
    • Handle: RePEc:eee:inecon:v:116:y:2019:i:c:p:50-57
    DOI: 10.1016/j.jinteco.2018.10.004
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    Cited by:

    1. Quint, Ansgar F. & Rudsinske, Jonas F., 2020. "Asymmetric general oligopolistic equilibrium," University of Göttingen Working Papers in Economics 405, University of Goettingen, Department of Economics.
    2. Beladi Hamid & Hollas Daniel & Chakrabarti Avik, 2019. "Myopic Mergers across Borders with Incomplete Information in GOLE," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-4, October.

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    More about this item

    Keywords

    General equilibrium; Oligopoly; International trade; Comparative advantage; Divisionalization; Staggered competition;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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