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Ricardian trade and the impact of domestic competition on export performance

  • Matilde Bombardini
  • Christopher J. Kurz
  • Peter M. Morrow

This paper develops and empirically examines a model of relative productivity differences both within and across industries for small open economies. We decompose the effect of industry productivity on export performance into direct effect of own-firm productivity and an indirect effect of higher peer-firm productivity. In a sample of Chilean and Colombian plants, we find evidence of both a positive direct effect and a negative indirect effect. The empirical evidence supports our theoretical prediction that industry-specific factors of production and asymmetric substitutability between domestic and foreign varieties drive the negative indirect effect. JEL classification: F10, F11, F12

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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 45 (2012)
Issue (Month): 2 (May)
Pages: 585-612

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Handle: RePEc:cje:issued:v:45:y:2012:i:2:p:585-612
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