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Comparative Advantage and Within-Industry Firms Performance

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  • Matthieu Crozet
  • Federico Trionfetti

Abstract

Guided by empirical evidence we consider firms heterogeneity in terms of factor intensity. We show that Heckscher-Ohlin comparative advantage and firm-level relative factor-intensity interact to jointly explain the observed differences in relative sales. Firms whose relative factor-intensity matches up with the comparative advantage of the country have lower relative marginal costs and larger relative sales than firms who do not. Our empirical analysis, conducted using data for a large panel of European firms, supports these predictions. Our findings also provide an original firm-level verification of the Heckscher-Ohlin model based on the effect of comparative advantage on firms relative sales.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2011-01.

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Date of creation: Jan 2011
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Handle: RePEc:cii:cepidt:2011-01

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Keywords: Factor intensity; Firms heterogeneity; Test of trade theories;

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Cited by:
  1. Forslid, Rikard & Okubo, Toshihiro, 2011. "Are capital intensive firms the biggest exporters?," CEPR Discussion Papers 8345, C.E.P.R. Discussion Papers.
  2. Julian Emami Namini & Ricardo Lopez, 2012. "Factor Price Overshooting with Trade Liberalization: Theory and Evidence," Working Papers 52, Brandeis University, Department of Economics and International Businesss School.

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