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Market Size, Competition, and the Product Mix of Exporters

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  • Marc Melitz
  • Thierry Mayer
  • 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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Paper provided by Harvard University OpenScholar in its series Working Paper with number 64736.

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Handle: RePEc:qsh:wpaper:64736

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  1. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, Elsevier, vol. 62(1), pages 53-82, January.
  2. Andrew Bernard & Stephen Redding & Peter Schott, 2009. "Multi-Product Firms and Trade Liberalization," Working Papers 09-21, Center for Economic Studies, U.S. Census Bureau.
  3. Eckel, Carsten & Neary, J. P., 2010. "Multi-product firms and flexible manufacturing in the global economy," Munich Reprints in Economics, University of Munich, Department of Economics 20525, University of Munich, Department of Economics.
  4. De Loecker, Jan & Goldberg, Pinelopi Koujianou & Khandelwal, Amit & Pavcnik, Nina, 2012. "Prices, Markups and Trade Reform," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8900, C.E.P.R. Discussion Papers.
  5. 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, London School of Economics and Political Science, LSE Library 33249, London School of Economics and Political Science, LSE Library.
  6. Thierry Mayer & Gianmarco Ottaviano, 2007. "The happy few: the internationalisation of European firms New facts based on firm-level evidence," Sciences Po publications info:hdl:2441/10147, Sciences Po.
  7. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d\'Agliano, University of Milano.
  8. Paul Allanson & Catia Montagna, 1999. "Multiproduct Firms and Market Structure: An Explorative Application to the Product Life Cycle," Dundee Discussion Papers in Economics, Economic Studies, University of Dundee 101, Economic Studies, University of Dundee.
  9. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer, Springer, vol. 43(3), pages 135-148, May.
  10. Matthieu Crozet & Pamina Koenig, 2008. "Structural Gravity Equations with Intensive and Extensive Margins," Working Papers 2008-30, CEPII research center.
  11. Francis Kramarz & Jonathan Eaton & Samuel Kortum, 2005. "An Anatomy of International Trade: Evidence from French Firms," 2005 Meeting Papers, Society for Economic Dynamics 197, Society for Economic Dynamics.
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  13. Gu, Wulong & Baldwin, John R., 2006. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," Economic Analysis (EA) Research Paper Series 2006038e, Statistics Canada, Analytical Studies Branch.
  14. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  15. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  16. Iacovone, Leonardo & Javorcik, Beata S., 2008. "Multi-product exporters : diversification and micro-level dynamics," Policy Research Working Paper Series 4723, The World Bank.
  17. James Harrigan & Haiyan Deng, 2008. "China's Local Comparative Advantage," NBER Working Papers 13963, National Bureau of Economic Research, Inc.
  18. Keith Head & Thierry Mayer, 2011. "Gravity, market potential and economic development," Journal of Economic Geography, Oxford University Press, Oxford University Press, vol. 11(2), pages 281-294, March.
  19. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
  20. Robert Feenstra & Hong Ma, 2007. "Optimal Choice of Product Scope for Multiproduct Firms under Monopolistic Competition," NBER Working Papers 13703, National Bureau of Economic Research, Inc.
  21. Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Producer Dynamics: New Evidence from Micro Data," NBER Books, National Bureau of Economic Research, Inc, number dunn05-1, October.
  22. Costas Arkolakis & Arnaud Costinot & Andrés Rodríguez-Clare, 2009. "New Trade Models, Same Old Gains?," NBER Working Papers 15628, National Bureau of Economic Research, Inc.
  23. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," NBER Working Papers 12322, National Bureau of Economic Research, Inc.
  24. repec:spo:wpecon:info:hdl:2441/10147 is not listed on IDEAS
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