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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. Nocco, Antonella & Ottaviano, Gianmarco & Salto, Matteo, 2013. "Monopolistic Competition and Optimum Product Selection: Why and how heterogeneity matters," CEPR Discussion Papers 9417, C.E.P.R. Discussion Papers.
  2. Sergey Kichko & Sergey Kokovin & Evgeny Zhelobodko, 2014. "Trade Patterns And Export Pricing Under Non-Ces Preferences," HSE Working papers WP BRP 54/EC/2014, National Research University Higher School of Economics.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Crafts, Nicholas & Wolf, Nikolaus, 2013. "The Location of the UK Cotton Textiles Industry in 1838: a Quantitative Analysis," CEPR Discussion Papers 9626, C.E.P.R. Discussion Papers.
  8. Segerstrom, Paul & Sugita, Yoichi, 2014. "The Impact of Trade Liberalization on Industrial Productivity," CEPR Discussion Papers 9952, C.E.P.R. Discussion Papers.
  9. repec:cge:warwcg:147 is not listed on IDEAS
  10. 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.

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