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Market Size, Competition, and the Product Mix of Exporters

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

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 toward 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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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 104 (2014)
Issue (Month): 2 (February)
Pages: 495-536

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Handle: RePEc:aea:aecrev:v:104:y:2014:i:2:p:495-536
Note: DOI: 10.1257/aer.104.2.495
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  1. Gregory Corcos & Massimo Del Gatto & Giordano Mion & Gianmarco I. P. Ottaviano, 2011. "Productivity and firm selection: quantifying the ‘new’ gains from trade," LSE Research Online Documents on Economics 42684, London School of Economics and Political Science, LSE Library.
  2. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2006. "Multi-product firms and trade liberalization," LSE Research Online Documents on Economics 3684, London School of Economics and Political Science, LSE Library.
  3. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
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  5. Andrew Bernard & J. Bradford Jensen & Stephen Redding & Peter Schott, 2007. "Firms in International Trade," Working Papers 07-14, Center for Economic Studies, U.S. Census Bureau.
  6. Costas Arkolakis & Sharat Ganapati & Marc-Andreas Muendler, 2016. "The Extensive Margin of Exporting Products: A Firm-level Analysis," Cowles Foundation Discussion Papers 2028, Cowles Foundation for Research in Economics, Yale University.
  7. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2008. "An Anatomy of International Trade: Evidence from French Firms," NBER Working Papers 14610, National Bureau of Economic Research, Inc.
  8. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  9. repec:spo:wpecon:info:hdl:2441/10147 is not listed on IDEAS
  10. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers dp0495, Centre for Economic Performance, LSE.
  11. James Harrigan & Haiyan Deng, 2008. "China's Local Comparative Advantage," NBER Working Papers 13963, National Bureau of Economic Research, Inc.
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  13. 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.
  14. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
  15. 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.
  16. 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.
  17. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, june. pag.
  18. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," NBER Working Papers 12322, National Bureau of Economic Research, Inc.
  19. John Baldwin & Wulong Gu, 2009. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 557-592 National Bureau of Economic Research, Inc.
  20. Iacovone, Leonardo & Javorcik, Beata S., 2008. "Multi-product exporters : diversification and micro-level dynamics," Policy Research Working Paper Series 4723, The World Bank.
  21. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  22. Allanson, Paul & Montagna, Catia, 2005. "Multiproduct firms and market structure: An explorative application to the product life cycle," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 587-597, September.
  23. De Loecker, Jan & Goldberg, Pinelopi Koujianou & Khandelwal, Amit & Pavcnik, Nina, 2012. "Prices, Markups and Trade Reform," CEPR Discussion Papers 8900, C.E.P.R. Discussion Papers.
  24. Matthieu Crozet & Pamina Koenig, 2008. "Structural Gravity Equations with Intensive and Extensive Margins," Working Papers 2008-30, CEPII research center.
  25. 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, June.
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