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Market Size, Competition, and the Product Mix of Exporters

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  • Thierry Mayer
  • Marc J. Melitz
  • Gianmarco I.P. Ottaviano

Abstract

We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16959.

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Date of creation: Apr 2011
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Publication status: published as Thierry Mayer & Marc J. Melitz & Gianmarco I. P. Ottaviano, 2014. "Market Size, Competition, and the Product Mix of Exporters," American Economic Review, American Economic Association, vol. 104(2), pages 495-536, February.
Handle: RePEc:nbr:nberwo:16959

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  1. Corocs Gregory & Massimo Del Gatto & Giordano Mion & Gianmarco I P. Ottaviano, 2009. "Productivity and firm selection: quantifying the "new" gains from trade," LSE Research Online Documents on Economics 33249, London School of Economics and Political Science, LSE Library.
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  6. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," NBER Working Papers 16641, National Bureau of Economic Research, Inc.
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  14. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers 00-08, Center for Economic Studies, U.S. Census Bureau.
  15. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, June.
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  17. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
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  22. Keith Head & Thierry Mayer, 2011. "Gravity, market potential and economic development," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 281-294, March.
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