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International Trade and Firm-level Markups when Location and Quality Matter

Author

Listed:
  • Flora Bellone

    (University of Nice Sophia Antipolis
    GREDEG CNRS)

  • Patrick Musso

    (University of Nice Sophia Antipolis
    GREDEG CNRS)

  • Lionel Nesta

    (OFCE Sciences Po.)

  • Frederic Warzynski

    (Aarhus University)

Abstract

In this paper, we estimate firm-level markups and test some micro-level predictions of a model of international trade with heterogenous firms and endogenous mark-ups. Our theoretical framework is an extended version of the Melitz and Ottaviano (2008) (MO) model which features both quality and spatial differentiation across firms. In line with our model, we find that firm markups are positively related to firm productivity and negatively related to the toughness of local competition. Considering the relationship between firm markups and exports, we find evidence that the quality enhancing channel overbalances the price depressing channel of global competition.

Suggested Citation

  • Flora Bellone & Patrick Musso & Lionel Nesta & Frederic Warzynski, 2014. "International Trade and Firm-level Markups when Location and Quality Matter," GREDEG Working Papers 2014-37, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2014-37
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Markups; Productivity; Exports; Firm-level data; France;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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