IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00554724.html
   My bibliography  Save this paper

The selection effect of two-way trade in the Melitz model: an alternative approach

Author

Listed:
  • Jacques Potin

    (ESSEC Business School)

Abstract

This paper studies the influential Melitz model of trade with heterogeneous firms using an alternative, intuitive approach. Contrary to what is often argued, it is an increase in product market competition that drives the bad firms out: with two-way trade, entry by foreign firms is not compensated by a "sufficient" reduction in the mass of surviving firms. To illustrate this, we decompose the total effect of trade in two partial effects: a domesticprofit-reducing effect due to foreign market penetration by the most productive firms; an average-profitreducing effect due to the payment of the fixed export costs. We also provide the new prediction that trade generally leads to (weakly) less entry in the industry. This clarifies key interpretation issues in a prolific literature.

Suggested Citation

  • Jacques Potin, 2009. "The selection effect of two-way trade in the Melitz model: an alternative approach," Post-Print hal-00554724, HAL.
    • Handle: RePEc:hal:journl:hal-00554724
    Note: View the original document on HAL open archive server: https://essec.hal.science/hal-00554724
    as

    Download full text from publisher

    File URL: https://essec.hal.science/hal-00554724/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Baroni, Michel & Barthélémy, Fabrice & Mokrane, Mahdi, 2005. "A PCA Factor Repeat Sales Index (1973-2001) To Forecast Apartment Prices in Paris (France)," ESSEC Working Papers DR 05002, ESSEC Research Center, ESSEC Business School.
    2. Batista, Catia & Potin, Jacques, 2008. "International Specialization and the Return to Capital, 1976-2000," ESSEC Working Papers DR 08001, ESSEC Research Center, ESSEC Business School.
    3. Baroni, Michel & Barthélémy, Fabrice & Mokrane, Mahdi, 2004. "The Paris Residential Market: Driving Factors and Market Behaviour 1973-2001," ESSEC Working Papers DR 04006, ESSEC Research Center, ESSEC Business School.
    4. Batista, Catia & Potin, Jacques, 2006. "Stages of Diversification and Capital Accumulation in an Heckscher-Ohlin World, 1975-1995," ESSEC Working Papers DR 06008, ESSEC Research Center, ESSEC Business School.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rutzer, Christian, 2014. "From the Loser to the Winner - How Trade Liberalization can lead to Leapfrogging between Countries," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100313, Verein für Socialpolitik / German Economic Association.
    2. Rutzer, Christian, 2014. "A Theory of Trade Liberalization and Innovations with Heterogeneous Firms," Working papers 2014/02, Faculty of Business and Economics - University of Basel.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Naiditch, Claire & Vranceanu, Radu, 2011. "Remittances as a social status signaling device," Research in Economics, Elsevier, vol. 65(4), pages 305-318, December.
    2. Giraud , Gaël & Renouard, Cécile, 2009. "Relational Capability: An Indicator of Collective Empowerment," ESSEC Working Papers DR 09012, ESSEC Research Center, ESSEC Business School.
    3. Marie-Léandre Gomez & Isabelle Bouty, 2009. "Unpacking Knowing Integration: A Practice-based Study in Haute Cuisine," Post-Print hal-00554745, HAL.
    4. Nicolas Prat & Isabelle Comyn-Wattiau & Jacky Akoka, 2009. "Combining Objects with Rules to Represent Aggregation Knowledge in Data Warehouse and OLAP Systems," Post-Print hal-00551866, HAL.
    5. Marie-Léandre Gomez, 2009. "Knowledge Dynamics During Planning Practices," Post-Print hal-00554798, HAL.
    6. Besancenot, Damien & Huynh, Kim & Vranceanu, Radu, 2009. "Desk rejection in an academic publication market model with matching frictions," ESSEC Working Papers DR 09008, ESSEC Research Center, ESSEC Business School.
    7. Marie-Léandre Gomez & Isabelle Bouty, 2009. "The Social Dimensions of Idea Work in Haute Cuisine: A Bourdieusian Perspective," Post-Print hal-00553515, HAL.
    8. Benchimol, Jonathan & Fourçans, André, 2009. "Money in a DSGE framework with an application to the Euro Zone," ESSEC Working Papers DR 09005, ESSEC Research Center, ESSEC Business School.
    9. Besancenot, Damien & Vranceanu, Radu, 2011. "Banks' risk race: A signaling explanation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 784-791, October.
    10. Benchimol, Jonathan & Fourçans, André, 2009. "Money in a DSGE framework with an application to the Euro Zone," ESSEC Working Papers DR 09005, ESSEC Research Center, ESSEC Business School.
    11. Crifo, Patricia & Mottis, Nicolas, 2010. "SRI Analysis and Asset Management: Independent or Convergent? A Field Study on the French Market," ESSEC Working Papers DR 10006, ESSEC Research Center, ESSEC Business School.
    12. Vranceanu, Radu & Sutan, Angela & Dubart, Delphine, 2012. "Trust and financial trades: Lessons from an investment game where reciprocators can hide behind probabilities," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(1), pages 72-78.
    13. Damien Besancenot & Kim Huynh & Radu Vranceanu, 2011. "A Matching Model of the Academic Publication Market," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 708-725, December.
    14. Bouty, Isabelle & Gomez, Marie-Léandre, 2009. "The Social Dimensions of Idea Work in Haute Cuisine: A Bourdieusian Perspective," ESSEC Working Papers DR 09010, ESSEC Research Center, ESSEC Business School.
    15. Giraud, Gaël & Renouard, Cécile, 2011. "Is the Veil of Ignorance Transparent?," OEconomia, Editions NecPlus, vol. 2011(02), pages 239-258, June.
    16. Esposito Vinzi, Vincenzo & Ringle, Christian M. & Squillacciotti, Silvia & Trinchera, Laura, 2007. "Capturing and Treating Unobserved Heterogeneity by Response Based Segmentation in PLS Path Modeling. A Comparison of Alternative Methods by Computational Experiments," ESSEC Working Papers DR 07019, ESSEC Research Center, ESSEC Business School.
    17. George R. Zodrow, 2019. "Capital Mobility and Capital Tax Competition," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 18, pages 543-570, World Scientific Publishing Co. Pte. Ltd..
    18. GOMEZ, Marie-Léandre, 2007. "A Bourdieusian Perspective on Strategizing," ESSEC Working Papers DR 07024, ESSEC Research Center, ESSEC Business School.
    19. Bouty, Isabelle & Gomez, Marie-Léandre, 2009. "Unpacking Knowing Integration: A Practice-based Study in Haute Cuisine," ESSEC Working Papers DR 09009, ESSEC Research Center, ESSEC Business School.
    20. Gomez, Marie-Léandre, 2009. "Knowledge Dynamics During Planning Practices," ESSEC Working Papers DR 09011, ESSEC Research Center, ESSEC Business School.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00554724. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.