This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Multi-Product Firms and Trade Liberalization

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Andrew B. Bernard
Stephen Redding
Peter K. Schott

Additional information is available for the following registered author(s):

Abstract

This paper develops a general equilibrium model of multi-product firms and analyzes their behavior during tradeliberalization. Firm productivity in a given product is modeled as a combination of firm-level "ability" and firmproduct-level "expertise", both of which are stochastic and unknown prior to the firm's payment of a sunk costof entry. Higher firm-level ability raises a firm's productivity across all products, which induces a positivecorrelation between a firm's intensive (output per product) and extensive (number of products) margins. Tradeliberalization fosters productivity growth within and across firms and in aggregate by inducing firms to shedmarginally productive products and forcing the lowest-productivity firms to exit. Though exporters produce asmaller range of products after liberalization, they increase the share of products sold abroad as well as exportsper product. All of these adjustments are shown to be relatively more pronounced in countries' comparativeadvantage industries.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://cep.lse.ac.uk/pubs/download/dp0769.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0769.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:cep:cepdps:dp0769

Contact details of provider:
Web page: http://cep.lse.ac.uk/pubs/

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: heterogeneous firms endogenous product scope love of variety core competency

Other versions of this item:

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

This paper has been announced in the following NEP Reports:

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. Bernard, Andrew & Redding, Stephen J & Schott, Peter, 2006. "Multi-Product Firms and Product Switching," CEPR Discussion Papers 5708, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November. [Downloadable!] (restricted)
    Other versions:
  3. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    Other versions:
  4. Baumol, William J, 1977. "On the Proper Cost Tests for Natural Monopoly in a Multiproduct Industry," American Economic Review, American Economic Association, vol. 67(5), pages 809-22, December. [Downloadable!] (restricted)
  5. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2005. "Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods," NBER Working Papers 11404, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Tor Jakob Klette and Samuel Kortum, 2004. "Innovating Firms and Aggregate Innovation," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 986-1018, October.
    Other versions:
  8. 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)
  9. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February. [Downloadable!] (restricted)
    Other versions:
  10. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  11. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," NBER Working Papers 12322, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September. [Downloadable!] (restricted)
    Other versions:
  13. Eaton, B Curtis & Schmitt, Nicolas, 1994. "Flexible Manufacturing and Market Structure," American Economic Review, American Economic Association, vol. 84(4), pages 875-88, September. [Downloadable!] (restricted)
    Other versions:
  14. 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)
  15. Bailey, Elizabeth E & Friedlaender, Ann F, 1982. "Market Structure and Multiproduct Industries," Journal of Economic Literature, American Economic Association, vol. 20(3), pages 1024-48, September. [Downloadable!] (restricted)
  16. Eric J. Bartelsman & Mark Doms, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September. [Downloadable!] (restricted)
    Other versions:
  17. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Blackwell Publishing, vol. 74(1), pages 31-66, 01. [Downloadable!] (restricted)
    Other versions:
  18. Panzar, John C & Willig, Robert D, 1977. "Economies of Scale in Multi-Output Production," The Quarterly Journal of Economics, MIT Press, vol. 91(3), pages 481-93, August. [Downloadable!] (restricted)
  19. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-34, June. [Downloadable!] (restricted)
    Other versions:
  20. Francis Kramarz & Jonathan Eaton & Samuel Kortum, 2005. "An Anatomy of International Trade: Evidence from French Firms," 2005 Meeting Papers 197, Society for Economic Dynamics.
    Other versions:
  21. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-28, June. [Downloadable!] (restricted)
  22. Choi, E Kwan & Harrigan, James, 2004. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  23. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
  24. Carsten Eckel & J. Peter Neary, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Economics Series Working Papers 292, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  25. Daniel Trefler, 2004. "The Long and Short of the Canada-U.S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September. [Downloadable!] (restricted)
    Other versions:
  26. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  27. Baldwin, Richard E. & Ottaviano, Gianmarco I. P., 2001. "Multiproduct multinationals and reciprocal FDI dumping," Journal of International Economics, Elsevier, vol. 54(2), pages 429-448, August. [Downloadable!] (restricted)
    Other versions:
  28. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March. [Downloadable!] (restricted)
  29. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco," NBER Working Papers 5715, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  30. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November. [Downloadable!] (restricted)
    Other versions:
  31. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Establishment size dynamics in the aggregate economy," Staff Report 382, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  32. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  33. 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. [Downloadable!] (restricted)
  34. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 245-76, January.
  35. Baldwin, John R. & Gu, Wulong, 2006. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," Economic Analysis (EA) Research Paper Series 2006038e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  36. repec:rus:hseeco:122439 is not listed on IDEAS
  37. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September. [Downloadable!] (restricted)
  38. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, 04. [Downloadable!] (restricted)
    Other versions:
Full references

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. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," NBER Working Papers 13054, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Antonio Navas-Ruiz & Davide Sala, 2007. "Technology Adoption and the Selection Effect of Trade," Economics Working Papers ECO2007/58, European University Institute. [Downloadable!]
    Other versions:
  3. Laura Alfaro & Andrew Charlton, 2007. "Intra-Industry Foreign Direct Investment," CEP Discussion Papers dp0825, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  4. Giorgio Gobbi & Roberta Zizza, 2007. "Does the Underground Economy Hold Back Financial Deepening? Evidence from the Italian Credit Market," CEP Discussion Papers dp0789, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  5. Ralph Ossa, 2007. "Trade Liberalization, Outsourcing, and Firm Productivity," CEP Discussion Papers dp0814, Centre for Economic Performance, LSE. [Downloadable!]
  6. Svetlana Demidova & Hiau Looi Kee & Kala Krishna, 2006. "Do Trade Policy Differences Induce Sorting? Theory and Evidence from Bangladeshi Apparel Exporters," NBER Working Papers 12725, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Carsten Eckel & J. Peter Neary, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Economics Series Working Papers 292, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  8. Henry G. Overman & Diego Puga & Matthew Turner, 2007. "Decomposing the Growth in Residential Land in the United States," CEP Discussion Papers dp0778, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  9. Paul R. Bergin & Ching-Yi Lin, 2008. "Exchange Rate Regimes and the Extensive Margin of Trade," NBER Working Papers 14126, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Nicholas Oulton, 2007. "Chain Indices of the Cost of Living and the Path-Dependence Problem: An Empirical Solution," CEP Discussion Papers dp0797, Centre for Economic Performance, LSE. [Downloadable!]
  11. Gianluca Benigno & Christoph Theonissen, 2006. "Consumption and Real Exchange Rates with Incomplete Markets and Non-Traded Goods," CEP Discussion Papers dp0771, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  12. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," PIER Working Paper Archive 06-015, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
    Other versions:
  13. Joze P. Damijan & Crt Kostevc & Saso Polanec, 2008. "From innovation to exporting or vice versa? Causal link between innovation activity and exporting in Slovenian microdata," LICOS Discussion Papers 20408, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  14. Willem Buiter, 2007. "Seigniorage," CEP Discussion Papers dp0786, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  15. Cosimo Beverelli Kornel Mahlstein, . "Outsourcing and Competition Policy," HEI Working Papers 11-2007, Economics Section, The Graduate Institute of International Studies. [Downloadable!]
  16. Alan Manning, 2007. "The Plant Size-Place Effect: Agglomeration and Monopsony in Labour Markets," CEP Discussion Papers dp0773, Centre for Economic Performance, LSE. [Downloadable!]
  17. Holger Görg & Richard Kneller & Balázs Muraközy, 2008. "What makes a successful export?," Kiel Working Papers 1399, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? Use the JEL tree to browse through the database by subfields.

This page was last updated on 2008-8-19.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.