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Trade Liberalization with Heterogenous Firms

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  • Richard E. Baldwin
  • Rikard Forslid

Abstract

This paper examines the impact of trade liberalization with heterogeneous firms using the Melitz (2003) model. We find a number of novel results and effects including a Stolper-Samuelson like result and several results related to the volume of trade, which are empirically testable. We also find what might be called an anti-variety effect as the result of trade liberalization. This resonates with the often voiced criticism from antiglobalists that globalization leads the world to become more homogenous by eliminating local specialities. Nevertheless, we find that trade liberalization always leads to welfare gains in the model.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12192.

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Date of creation: May 2006
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Publication status: published as Richard E. Baldwin & Rikard Forslid, 2010. "Trade Liberalization with Heterogeneous Firms," Review of Development Economics, Blackwell Publishing, vol. 14(2), pages 161-176, 05.
Handle: RePEc:nbr:nberwo:12192

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  1. Bee Yan Aw & Sukkyun Chung & Mark J. Roberts, 1998. "Productivity and the Decision to Export: Micro Evidence from Taiwan and South Korea," NBER Working Papers, National Bureau of Economic Research, Inc 6558, National Bureau of Economic Research, Inc.
  2. Wang, Zhen Kun & Winters, L. Alan, 1991. "The Trading Potential of Eastern Europe," CEPR Discussion Papers, C.E.P.R. Discussion Papers 610, C.E.P.R. Discussion Papers.
  3. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2003. "Export versus FDI," NBER Working Papers, National Bureau of Economic Research, Inc 9439, National Bureau of Economic Research, Inc.
  4. Baldwin, Richard & Robert-Nicoud, Frédéric, 2006. "Trade and Growth with Heterogenous Firms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5563, C.E.P.R. Discussion Papers.
  5. Lu�s M B Cabral & Jos� Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, American Economic Association, vol. 93(4), pages 1075-1090, September.
  6. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers, National Bureau of Economic Research, Inc 11471, National Bureau of Economic Research, Inc.
  7. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999. "Agglomeration and Trade Revisited," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
  8. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Falling Trade Costs, Heterogeneous Firms, and Industry Dynamics," Yale School of Management Working Papers, Yale School of Management ysm357, Yale School of Management.
  9. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers, Centro Studi Luca d\'Agliano, University of Milano 201, Centro Studi Luca d\'Agliano, University of Milano.
  10. Richard E. Baldwin & Rikard Forslid, 2010. "Trade Liberalization with Heterogeneous Firms," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 14(2), pages 161-176, 05.
  11. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers, Center for Economic Studies, U.S. Census Bureau 00-08, Center for Economic Studies, U.S. Census Bureau.
  12. Richard Baldwin & Toshihiro Okubo, 2005. "Heterogeneous Firms, Agglomeration and Economic Geography: Spatial Selection and Sorting," NBER Working Papers, National Bureau of Economic Research, Inc 11650, National Bureau of Economic Research, Inc.
  13. Catia Montagna, 1998. "Efficiency Gaps, Love of Variety and International Trade," Dundee Discussion Papers in Economics, Economic Studies, University of Dundee 090, Economic Studies, University of Dundee.
  14. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2004. "Dissecting Trade: Firms, Industries, and Export Destinations," NBER Working Papers, National Bureau of Economic Research, Inc 10344, National Bureau of Economic Research, Inc.
  15. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles, Harvard University Department of Economics 3229098, Harvard University Department of Economics.
  16. Feenstra, Robert & Rose, Andrew K, 1997. "Putting Things in Order: Patterns of Trade Dynamics and Macroeconomics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1629, C.E.P.R. Discussion Papers.
  17. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, Econometric Society, vol. 71(6), pages 1695-1725, November.
  18. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  19. Schmitt, Nicolas & Yu, Zhihao, 2001. "Economies of scale and the volume of intra-industry trade," Economics Letters, Elsevier, Elsevier, vol. 74(1), pages 127-132, December.
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