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International Trade and Firms’ Heterogeneity Under Monopolistic Competition

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  • Sébastien Jean

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

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2000-13.

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Date of creation: Sep 2000
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Handle: RePEc:cii:cepidt:2000-13

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Related research

Keywords: Monopolistic Competition; firms heterogeneity; product differentiation; Specialization; International trade; International trade models and databases; Globalization; International firms;

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  1. 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.
  2. Montagna, Catia, 1995. "Monopolistic Competition with Firm-Specific Costs," Oxford Economic Papers, Oxford University Press, vol. 47(2), pages 318-28, April.
  3. 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.
  4. Bradford J Jensen & Andrew B Bernard, 1994. "Exporters, Skill Upgrading And The Wage Gap," Working Papers 94-13, Center for Economic Studies, U.S. Census Bureau.
  5. 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.
  6. 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.
  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. J Bradford Jensen & Andrew B Bernard, 2001. "Why Some Firms Export," Working Papers 01-05, Center for Economic Studies, U.S. Census Bureau.
  9. Andrew Bernard & Joachim Wagner, 1997. "Exports and success in German manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(1), pages 134-157, March.
  10. Catia Montagna, 1998. "Efficiency Gaps, Love of Variety and International Trade," Dundee Discussion Papers in Economics 090, Economic Studies, University of Dundee.
  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. 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.
  13. 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.
  14. Andrew B. Bernard & J. Bradford Jensen, 1999. "Exporting and Productivity," NBER Working Papers 7135, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Jørgensen, Jan G. & Schröder, Philipp J.H., 2008. "Fixed export cost heterogeneity, trade and welfare," European Economic Review, Elsevier, vol. 52(7), pages 1256-1274, October.
  2. repec:spo:wpecon:info:hdl:2441/6128 is not listed on IDEAS
  3. 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.
  4. Blanchard, Michel & Blanchard, Frederic, 2007. "Optimism, Pessimism, and the Gains from Trade," MPRA Paper 6342, University Library of Munich, Germany.
  5. 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.
  6. Matthew T Cole & Ronald B Davies, 2009. "Optimal Tariffs, Tariff Jumping, and Heterogeneous Firms," Working Papers 200919, School Of Economics, University College Dublin.
  7. Zhihao Yu, 2002. "Entrepreneurship and intra-industry trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 277-290, June.
  8. 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.
  9. 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.
  10. Spiros Bougheas & Holger Görg, . "Organizational Forms for Global Engagement of Firms," Discussion Papers 08/33, University of Nottingham, GEP.
  11. 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.
  12. Eddy Bekkers, 2011. "Heterogeneous Popularity and Exporting Uncertainty," Open Economies Review, Springer, vol. 22(5), pages 797-824, November.
  13. Matthew Cole, 2011. "Not all trade restrictions are created equally," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(3), pages 411-427, September.
  14. 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.
  15. 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.
  16. Han-Hsin Chang & Charles Van Marrewijk, 2013. "Firm heterogeneity and development: Evidence from Latin American countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(1), pages 10-51, February.

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