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On The Impact Of Competition On Trade And Firm Location

Listed author(s):
  • Toshihiro Okubo
  • Pierre M. Picard
  • Jacques-François Thisse

type="main"> We study how the level of trade costs and the intensity of competition interact to explain the nature and intensity of trade within a given industry and the location of firms across countries. As trade costs decrease from very high to very low values, the global economy moves from autarky to two-way trade, through one-way trade from the larger to the smaller region. By exploring the intensive and extensive margins of exports, we investigate how the intensity of trade reacts to the degree of competitiveness. Furthermore, when firms are free to change location, they flow from the small to the large country, and the larger country is always a net exported on the manufactured good. Firms located in the big country have a bigger size than those located in the small one. Under one-way trade, the relocation of firms changes their attitude toward export.

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File URL: http://hdl.handle.net/10.1111/jors.12139
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Article provided by Wiley Blackwell in its journal Journal of Regional Science.

Volume (Year): 54 (2014)
Issue (Month): 5 (November)
Pages: 731-754

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Handle: RePEc:bla:jregsc:v:54:y:2014:i:5:p:731-754
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  1. Ottaviano, Gianmarco & Thisse, Jacques-Francois, 2004. "Agglomeration and economic geography," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 58, pages 2563-2608 Elsevier.
  2. Volker Nocke, 2006. "A Gap for Me: Entrepreneurs and Entry," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 929-956, 09.
  3. Picard, Pierre M. & Okubo, Toshihiro, 2012. "Firms' locations under demand heterogeneity," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 961-974.
  4. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  5. Okubo, Toshihiro & Picard, Pierre M. & Thisse, Jacques-François, 2010. "The spatial selection of heterogeneous firms," Journal of International Economics, Elsevier, vol. 82(2), pages 230-237, November.
  6. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
  7. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
  8. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2009. "The dynamics of trade and competition," Journal of International Economics, Elsevier, vol. 77(1), pages 50-62, February.
  9. Weinstein, David E., 1992. "Competition and unilateral dumping," Journal of International Economics, Elsevier, vol. 32(3-4), pages 379-388, May.
  10. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 441-487.
  11. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
  12. Behrens, Kristian, 2005. "How endogenous asymmetries in interregional market access trigger regional divergence," Regional Science and Urban Economics, Elsevier, vol. 35(5), pages 471-492, September.
  13. Behrens, Kristian, 2005. "Market size and industry location: Traded vs non-traded goods," Journal of Urban Economics, Elsevier, vol. 58(1), pages 24-44, July.
  14. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
  15. Behrens, Kristian, 2004. "Agglomeration without trade: how non-traded goods shape the space-economy," Journal of Urban Economics, Elsevier, vol. 55(1), pages 68-92, January.
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