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International Trade And Industrial Dynamics

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  • Josh Ederington
  • Phillip McCalman

Abstract

In this article, industrial evolution is driven by endogenous technology choices of firms, generating a rich environment that includes the possibility of a dramatic shakeout. The likelihood, magnitude, and timing of this shakeout are characterized and depend not only on the size of an innovation but also on cost structure. In this setting, trade liberalization reduces the likelihood of a shakeout, resulting in more stable industrial structures. However, when shakeouts arise in global markets, the distribution of exits can vary widely across countries. Furthermore, conditions exist where a shakeout occurs in a closed economy but not in an open economy. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Josh Ederington & Phillip McCalman, 2009. "International Trade And Industrial Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 961-989, August.
  • Handle: RePEc:ier:iecrev:v:50:y:2009:i:3:p:961-989
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2009.00555.x
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    Citations

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    Cited by:

    1. Ederington, Josh & McCalman, Phillip, 2011. "Infant industry protection and industrial dynamics," Journal of International Economics, Elsevier, vol. 84(1), pages 37-47, May.
    2. repec:kap:jeczfn:v:122:y:2017:i:3:d:10.1007_s00712-017-0540-x is not listed on IDEAS
    3. Ederington, Josh & McCalman, Phillip, 2008. "Endogenous firm heterogeneity and the dynamics of trade liberalization," Journal of International Economics, Elsevier, vol. 74(2), pages 422-440, March.
    4. Taiji Furusawa & Noriyuki Yanagawa, 2010. "Firm Heterogeneity under Financial Imperfection: Impacts of Trade and Capital Movement," CIRJE F-Series CIRJE-F-768, CIRJE, Faculty of Economics, University of Tokyo.
    5. Bester, Helmut & Milliou, Chrysovalantou & Petrakis, Emmanuel, 2012. "Wage bargaining, productivity growth and long-run industry structure," Labour Economics, Elsevier, vol. 19(6), pages 923-930.
    6. Schröder, Philipp J.H. & Sørensen, Allan, 2012. "Firm exit, technological progress and trade," European Economic Review, Elsevier, vol. 56(3), pages 579-591.
    7. Götz, Georg & Ederington, Josh, 2017. "Leapfrogging: Time of Entry and Firm Productivity," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168126, Verein für Socialpolitik / German Economic Association.
    8. Hiroshi Mukunoki, 2017. "Market access and technology adoption in the presence of FDI," Journal of Economics, Springer, vol. 122(3), pages 199-238, November.
    9. McCalman, Phillip, 2010. "Trade policy in a "super size me" world," Journal of International Economics, Elsevier, vol. 81(2), pages 206-218, July.

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