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Multi-product Firms and Trade Liberalization

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  • Stephen J Redding

    (London School of Economics and CEPR)

  • Peter K Schott

    (Yale School of Management and NBER)

  • Andrew B Bernard

    (Tuck School of Business and NBER)

Abstract

This article develops a general equilibrium model of multiple-product, multiple-destination firms, which allows for heterogeneity in ability across firms and in product attributes within firms. Firms make endogenous entry and exit decisions and each surviving firm chooses optimally the range of products to supply to each market. We show that the resulting selection, across and within firms, provides a natural explanation for a number of features of trade across firms, products, and countries. Using both time-series changes in trade policy and cross-section variation in trade, we provide empirical evidence in support of the predictions of the model. Copyright 2011, Oxford University Press.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 44.

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Date of creation: 2007
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Handle: RePEc:red:sed007:44

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