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Comparative Advantage and Within-Industry Firms Performance

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  • Crozet, Matthieu
  • Trionfetti, Federico

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 rela- tive 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 us- ing data for a large panel of European firms, supports these predic- tions. 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 CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 1101.

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Length: 46 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:cpm:docweb:1101

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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, C.E.P.R. 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, Brandeis University, Department of Economics and International Businesss School 52, Brandeis University, Department of Economics and International Businesss School.

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