Hansen, Jørgen Drud () (Department of Economics, Aarhus School of Business) Kvedaras, Virmantas (Department of Econometric Analysis) Nielsen, Jørgen Ulff-Møller () (Department of Economics, Aarhus School of Business)
Abstract
This paper presents a dynamic international trade model based on monopolistic competition, where observed intra-industry differences at a given point in time reflect different stages of the firm’s life cycle. New product varieties of still higher quality enter the market every period rendering old varieties obsolescent in a process of creative destruction. For given technology (variety) production costs decrease after an infant period due to learning. It is shown that several patterns of exports may arise depending primarily on the size of fixed trade costs. At a given point in time firms therefore differ due to different age, although all firms are symmetric in a life cycle perspective. The paper thus offers an alternative view on firm heterogeneity compared with other recent papers, where productivity differences appear as an outcome of a stochastic process.
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Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number
08-7.
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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