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International Trade and Firms' Heterogeneity under Monopolistic Competition

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  • Sébastien Jean

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Abstract

This article studies the interactions between international trade and firms' heterogeneity by proposing a tractable model consistent with the stylised facts. The model describes, in a general equilibrium framework, two economies producing and trading two goods, one homogeneous and the other differentiated. In the differentiated-good sector, firms are heterogeneous by their marginal cost, in a context of monopolistic competition with free-entry and exit. They incur a fixed production cost, but also a fixed cost if they choose to export. We show that trade in differentiated goods increases industry-wide efficiency, through two different logics: one defensive and import-driven; the other offensive and export-driven. Copyright Kluwer Academic Publishers 2002

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File URL: http://hdl.handle.net/10.1023/A:1015248022706
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 13 (2002)
Issue (Month): 3 (July)
Pages: 291-311

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Handle: RePEc:kap:openec:v:13:y:2002:i:3:p:291-311

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: international trade; firms' heterogeneity; product differentiation; monopolistic competition; productive efficiency;

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References

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  1. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  3. 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.
  4. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Montagna, Catia, 1995. "Monopolistic Competition with Firm-Specific Costs," Oxford Economic Papers, Oxford University Press, vol. 47(2), pages 318-28, April.
  6. Van Long, N. & Soubeyran, A., 1996. "Cost Heterogeneity, Industry Concentration and Startegic Trade Policies," G.R.E.Q.A.M. 96a39, Universite Aix-Marseille III.
  7. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning By Exporting Important? Micro-Dynamic Evidence From Colombia, Mexico, And Morocco," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 903-947, August.
  8. Tybout, James R. & Westbrook, M. Daniel, 1995. "Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries," Journal of International Economics, Elsevier, vol. 39(1-2), pages 53-78, August.
  9. J Bradford Jensen & Andrew B Bernard, 2001. "Why Some Firms Export," Working Papers 01-05, Center for Economic Studies, U.S. Census Bureau.
  10. Andrew B. Bernard & J. Bradford Jensen, 2000. "Exporting and Productivity," Working Papers 00-07, Center for Economic Studies, U.S. Census Bureau.
  11. 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.
  12. Bernard, A. & Wagner, J., 1996. "Exports and Success in German Manufacturing," Working papers 96-10, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, vol. 42(1-2), pages 3-31, February.
  14. Hine, Robert C & Wright, Peter W, 1998. "Trade with Low Wage Economies, Employment and Productivity in UK Manufacturing," Economic Journal, Royal Economic Society, vol. 108(450), pages 1500-1510, September.
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Citations

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Cited by:
  1. H.H. Chang & C. van Marrewijk, 2011. "Firm Heterogeneity and Development: Evidence from Latin American countries," Working Papers 11-14, Utrecht School of Economics.
  2. Blanchard, Michel & Blanchard, Frederic, 2007. "Optimism, Pessimism, and the Gains from Trade," MPRA Paper 6342, University Library of Munich, Germany.
  3. repec:spo:wpecon:info:hdl:2441/6128 is not listed on IDEAS
  4. Sun, Churen & Tian, Guoqiang & Zhang, Tao, 2011. "When Pareto meets Melitz: the inapplicability of the Melitz-Pareto model for Chinese firms," MPRA Paper 35597, University Library of Munich, Germany.
  5. Eddy Bekkers, 2011. "Heterogeneous Popularity and Exporting Uncertainty," Open Economies Review, Springer, vol. 22(5), pages 797-824, November.
  6. Matthew T. Cole (University College Dublin) Ronald B. Davies (University College Dublin), 2009. "Optimal Tariffs, Tariff Jumping, and Heterogeneous Firms," The Institute for International Integration Studies Discussion Paper Series iiisdp302, IIIS.
  7. Spiros Bougheas & Holger Görg, 2008. "Organizational forms for global engagement of firms," Kiel Working Papers 1448, Kiel Institute for the World Economy.
  8. Zhihao Yu, 2002. "Entrepreneurship and intra-industry trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 277-290, June.
  9. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers 11471, National Bureau of Economic Research, Inc.
  10. Schröder, Philipp J.H. & Jørgensen, Jan G., 2007. "Fixed Export Cost heterogeneity, Trade and Welfare," MPRA Paper 7397, University Library of Munich, Germany.
  11. Matthew Cole, 2011. "Not all trade restrictions are created equally," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(3), pages 411-427, September.
  12. 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.
  13. Naudé, Wim & Matthee, Marianne, 2012. "Do Export Costs Matter in Determining Whether, When, and How Much African Firms Export?," Working Papers 38, JICA Research Institute.
  14. Daniel Mirza & Emmanuel Milet & Guillaume Gaulier, 2010. "Les firmes françaises dans le commerce international de services," Économie et Statistique, Programme National Persée, vol. 435(1), pages 125-147.
  15. Lionel Fontagné & Matthieu Crozet, 2010. "L'internationalisation des entreprises : une analyse microéconomique de la mondialisation," Économie et Statistique, Programme National Persée, vol. 435(1), pages 3-12.
  16. David Greenaway & Zhihong Yu, 2004. "Firm-level interactions between exporting and productivity: Industry-specific evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(3), pages 376-392, September.

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