Comparative advantage, multi-product firms and trade liberalisation : An empirical test
AbstractThis paper investigates how economies of scope in multi-product firms interact with comparative advantage in determining the effect of trade liberalisation on resource reallocation, using Belgian manufacturing firm- and firm-product-level data over the period 1997-2007. We first provide evidence on industry integration induced by multi-product firms producing simultaneously in multiple industries and on the extent to which industry integration occurs between industries that have different degrees of comparative advantage. We then examine the impact of opening up trade with low-wage countries on both inter- and intra-industry resource reallocation, taking into account heterogeneity in the integration rate across sectors and industries. Our results indicate that, within more closely integrated sectors, trade liberalisation with low-wage countries leads to less reallocation from low-skill-intensity (comparative-disadvantage) industries to high-skill-intensity (comparative-advantage) industries, both in terms of employment and output. We also find that more integrated industries experience less skill upgrading after trade liberalisation with low-wage countries. Furthermore, we find that within sectors with a low integration rate, trade liberalisation with low-wage countries induces relatively more aggregate TFP and average firm output growth in comparative-advantage industries than in comparative-disadvantage industries, in line with the prediction of Bernard, Redding and Schott (2007), while the opposite is true in highly integrated sectors. Decomposition of the industry-level aggregate TFP changes reveals that the result is mainly driven by reallocation between incumbent firms within industries. Overall, the results are highly consistent with the predictions of the Song and Zhu (2010) model.
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 National Bank of Belgium in its series Working Paper Research with number 219.
Length: 65 pages
Date of creation: Jan 2012
Date of revision:
Contact details of provider:
Postal: Boulevard de Berlaimont 14, B-1000 Bruxelles
Phone: (+ 32) (0) 2 221 25 34
Fax: (+ 32) (0) 2 221 31 62
Web page: http://www.nbb.be
More information through EDIRC
trade liberalisation; industry integration; comparative advantage; firm heterogeneity; microeconomic panel data; Total Factor Productivity;
Find related papers by JEL classification:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-01 (All new papers)
- NEP-EFF-2012-02-01 (Efficiency & Productivity)
- NEP-INT-2012-02-01 (International Trade)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.