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Heterogeneous Firms and Trade

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  • Marc J. Melitz
  • Stephen J. Redding

Abstract

This paper reviews the new approach to international trade based on firm heterogeneity in differentiated product markets. This approach explains a variety of features exhibited in disaggregated trade data, including the higher productivity of exporters relative to non-exporters, within-industry reallocations of resources following trade liberalization, and patterns of trade participation across firms and destination markets. Accounting for these empirical patterns reveals new mechanisms through which the aggregate economy is affected by trade liberalization, including endogenous increases in average industry and firm productivity.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1183.

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Date of creation: Dec 2012
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Handle: RePEc:cep:cepdps:dp1183

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Keywords: firm heterogeneity; international trade; productivity;

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Cited by:
  1. Crafts, Nicholas & Wolf, Nikolaus, 2013. "The Location of the UK Cotton Textiles Industry in 1838: a Quantitative Analysis," CAGE Online Working Paper Series 148, Competitive Advantage in the Global Economy (CAGE).
  2. Igor A. Bykadorov & Alexey A. Gorn & Sergey G. Kokovin & Evgeny V. Zhelobodko, 2014. "Losses From Trade In Krugman’s Model: Almost Impossible," HSE Working papers WP BRP 61/EC/2014, National Research University Higher School of Economics.
  3. Giorgia Giovannetti & Enrico Marvasi & Marco Sanfilippo, 2013. "Supply Chains and the Internalization of SMEs: Evidence from Italy," Working Papers - Economics wp2013_30.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  4. Paul S. Segerstrom & Yoichi Sugita, 2013. "The Impact of Trade Liberalization on Industrial Productivity," CESifo Working Paper Series 4365, CESifo Group Munich.
  5. Davide Suverato, 2014. "Export and the Labor Market: a Dynamic Model with on-the-job Search," Development Working Papers 368, Centro Studi Luca d\'Agliano, University of Milano, revised 26 Jun 2014.
  6. Sergey Kichko & Sergey Kokovin & Evgeny Zhelobodko, 2013. "Trade Patterns and Export Pricing Under Non-CES Preferences," FIW Working Paper series 124, FIW.
  7. Lopez-Garcia, Paloma & di Mauro, Filippo & Benatti, Nicola & Angeloni, Chiara & Altomonte, Carlo & Bugamelli, Matteo & D’Aurizio, Leandro & Navaretti, Giorgio Barba & Forlani, Emanuele & Rossetti, S, 2014. "Micro-based evidence of EU competitiveness: the CompNet database," Working Paper Series 1634, European Central Bank.
  8. Suverato, Davide, 2014. "Export and the Labor Market: a Dynamic Model with on-the-job Search," Discussion Papers in Economics 20919, University of Munich, Department of Economics.
  9. Díaz-Mora, Carmen & Córcoles, David & Gandoy, Rosario, 2014. "Exit from Exporting: Does Engagement in Transnational Networks Matter?," MPRA Paper 57642, University Library of Munich, Germany.
  10. Antonella Nocco & Gianmarco I. P. Ottaviano & Matteo Salto, 2013. "Monopolistic competition and optimum product selection: why and how heterogeneity matters," LSE Research Online Documents on Economics 51541, London School of Economics and Political Science, LSE Library.
  11. Artopoulos, Alejandro & Friel, Daniel & Hallak, Juan Carlos, 2013. "Export emergence of differentiated goods from developing countries: Export pioneers and business practices in Argentina," Journal of Development Economics, Elsevier, vol. 105(C), pages 19-35.

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