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Multiproduct Firms and Trade Liberalization

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  • Andrew B. Bernard
  • Stephen J. Redding
  • Peter K. Schott

Abstract

This article develops a general equilibrium model of multiple-product, multiple-destination firms, which allows for heterogeneity in ability across firms and in product attributes within firms. Firms make endogenous entry and exit decisions and each surviving firm chooses optimally the range of products to supply to each market. We show that the resulting selection, across and within firms, provides a natural explanation for a number of features of trade across firms, products, and countries. Using both time-series changes in trade policy and cross-section variation in trade, we provide empirical evidence in support of the predictions of the model. Copyright 2011, Oxford University Press.

Suggested Citation

  • Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1271-1318.
  • Handle: RePEc:oup:qjecon:v:126:y:2011:i:3:p:1271-1318
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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