On the impact of trade on industrial structures : The role of entry cost heterogeneity
AbstractThis paper investigates the impacts of progressive trade openness, technological externalities, and heterogeneity of individuals on the formation of entrepreneurship in a two-country occupation choice model. We show that trade opening gives rise to a non-monotonic process of international specialization, in which the share of entrepreneurial firms in the large (small) country first increases (decreases) and then decreases (increases), with the global economy exhibiting first de-industrialization and then re-industrialization. When countries have the same size, we also show that strong technological externalities make the symmetric equilibrium unstable, generating equilibrium multiplicity, while sufficient heterogeneity of individuals leads to the stability and uniqueness of the symmetric equilibrium.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2009046.
Date of creation: 01 Aug 2009
Date of revision:
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entrepreneurship; trade liberalization; externality; heterogeneity; stability;
Other versions of this item:
- Daisuke Oyama & Yasuhiro Sato & Takatoshi Tabuchi & Jacques-François Thisse, 2009. "On the impact of trade on industrial structures: The role of entry cost heterogeneity," PSE Working Papers halshs-00566786, HAL.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-ENT-2010-03-28 (Entrepreneurship)
- NEP-INT-2010-03-28 (International Trade)
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.:
- Victor Ginsburgh & André De Palma & Yorgo Papageorgiou & Jacques-François Thisse, 1995.
"The principle of minimum differentiation holds under sufficient heterogeneity,"
ULB Institutional Repository
2013/3317, ULB -- Universite Libre de Bruxelles.
- de Palma, A, et al, 1985. "The Principle of Minimum Differentiation Holds under Sufficient Heterogeneity," Econometrica, Econometric Society, vol. 53(4), pages 767-81, July.
- Victor Ginsburgh & André De Palma & Yorgo Papageorgiou & Jacques-François Thisse, 1999. "The principle of minimum differentiation holds under sufficient heterogeneity," ULB Institutional Repository 2013/3319, ULB -- Universite Libre de Bruxelles.
- Victor Ginsburgh & André De Palma & Yorgo Papageorgiou & Jacques-François Thisse, 1985. "The principle of minimum differentiation holds under sufficient heterogeneity," ULB Institutional Repository 2013/1759, ULB -- Universite Libre de Bruxelles.
- Daisuke Oyama & Yasuhiro Sato & Takatoshi Tabuchi & Jacques‐François Thisse, 2011. "On the impact of trade on the industrial structures of nations," International Journal of Economic Theory, The International Society for Economic Theory, vol. 7(1), pages 93-109, 03.
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