Akerman, Anders () (Dept. of Economics, Stockholm University) Forslid, Rikard () (Dept. of Economics, Stockholm University)
Abstract
This paper modifies the heterogenous firms and trade model by Melitz (2003) by explicitly modelling the beachhead cost of a firm in a new market as a function of market size. This leads to several new predictions compared to the standard model. In particular, the productivity of non exporters and exporters depends on market size. Moreover, manufacturing export shares vary inversely with market size. However, export shares converge (upwards) as markets are integrated. The empirical part of the paper offers support for our model specification.
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Publisher Info
Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number
2007:14.
Length: 29 pages Date of creation: 30 Jul 2007 Date of revision: Handle: RePEc:hhs:sunrpe:2007_0014
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Find related papers by JEL classification: H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
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