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International Trade with Firm Heterogeneity in Factor Shares


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  • Julian Emami Namini

    (Erasmus School of Economics, Erasmus University Rotterdam)

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    This paper presents a trade model with capital and labor as factors of production. The main contribution of this paper is that it considers a new type of firm heterogeneity, which is empirically relevant: firms in this paper differ with respect to their factor shares in production. Therefore, this paper addresses the following four empirical facts on globalization, firms’ factor shares and factor prices: (i) firms within narrowly defined industries exhibit a large degree of heterogeneity in factor shares in production; (ii) exporters are, on average, more capital intensive than non—exporters; (iii) globalization decreases labor’s share in national income; (iv) the larger the share of exporters in the industry, the larger the increase in the industry’s wages due to globalization.

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    Bibliographic Info

    Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 09-020/1.

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    Date of creation: 24 Feb 2009
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    Handle: RePEc:dgr:uvatin:20090020

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    Keywords: two—factor trade model; firm heterogeneity in factor shares;

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