Heterogeneous Firms, Trade, and Economic Policy: Insights from a Simple Two-Sector Model
AbstractThe robust empirical finding that exporting firms are systematically different from firms that merely serve domestic consumers has inspired the development of a new brand of trade theory, the theory of heterogeneous firms and trade. The establishment of a canonical model due to Melitz (2003) has induced a recent wave of research which explores various policy issues and policy instruments. This paper uses a simple tractable two-sector model of monopolistic competition as unifying framework to bring out key lessons of this recent research. We address the gains from trade, country asymmetries involving technology potentials, market sizes, trade openness and various business conditions as well as the international repercussions that emerge when countries non-cooperatively choose entry subsidies and their levels of basic research. We also reinvestigate the process of market exit.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6109.
Length: 30 pages
Date of creation: Nov 2011
Date of revision:
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Massimo Del Gatto & Giordano Mion & Gianmarco I.P. Ottaviano, 2006.
"Trade Integration, Firm Selection and the Costs of Non-Europe,"
Development Working Papers
218, Centro Studi Luca d\'Agliano, University of Milano.
- M. Del Gatto & G. Mion & GIP. Ottaviano, 2007. "Trade Integration, Firm Selection and the Costs of Non-Europe," Working Paper CRENoS 200703, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- DEL GATTO, Massimo & MION, Giordano & OTTAVIANO, Gianmarco I.P., 2006. "Trade integration, firm selection and the costs of non-Europe," CORE Discussion Papers 2006061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Del Gatto, Massimo & Mion, Giordano & Ottaviano, Gianmarco Ireo Paolo, 2006. "Trade Integration, Firm Selection and the Costs of Non-Europe," CEPR Discussion Papers 5730, C.E.P.R. Discussion Papers.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity,"
American Economic Review,
American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.