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Multiproduct firms and product scope adjustment in trade

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  • Lopresti, John

Abstract

A recent theoretical literature has emphasized the importance of multiproduct firms in trade. However, models within this literature have reached contradictory conclusions regarding the product-level response of firms to changes in trade costs. This paper attempts to resolve these contradictions by employing Bayesian techniques to estimate the product portfolio response throughout the distribution of US firms following the Canada–US Free Trade Agreement of 1989. I find evidence of a differential response among firms that are heterogeneous in terms of their involvement in foreign markets. Firms with less than 10–20% of total sales accounted for by foreign markets reduced product diversification as trade costs fell, while more foreign-oriented firms increased diversification.

Suggested Citation

  • Lopresti, John, 2016. "Multiproduct firms and product scope adjustment in trade," Journal of International Economics, Elsevier, vol. 100(C), pages 160-173.
  • Handle: RePEc:eee:inecon:v:100:y:2016:i:c:p:160-173
    DOI: 10.1016/j.jinteco.2016.03.002
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    References listed on IDEAS

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    Cited by:

    1. repec:aea:aejmic:v:10:y:2018:i:1:p:236-77 is not listed on IDEAS
    2. Lisandra Flach & Michael Irlacher, 2018. "Product versus Process: Innovation Strategies of Multiproduct Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 236-277, February.
    3. Miao, Zhuang & Li, Yifan, 2017. "Trade Scopes across Destinations: Evidence from Chinese Firm," MPRA Paper 80863, University Library of Munich, Germany, revised 15 Aug 2017.
    4. repec:eee:reveco:v:54:y:2018:i:c:p:262-273 is not listed on IDEAS

    More about this item

    Keywords

    Multiproduct firms; CUSFTA; Product scope adjustment; Bayesian;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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