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Granular Comparative Advantage

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  • Cecile Gaubert
  • Oleg Itskhoki

Abstract

Large firms play a pivotal role in international trade. We develop a multisector granular model of trade where sectors host a finite number of firms. Both aggregate and granular firm-level forces shape comparative advantage. The model is estimated using French microdata on firm domestic and export sales. We find that granularity accounts for about 20% of the sectoral variation in export intensity and is more pronounced in highly export-intensive sectors. An extension to a dynamic environment with both idiosyncratic and aggregate shocks reveals that firm dynamics plays a central role in shaping comparative advantage reversals observed in the data.

Suggested Citation

  • Cecile Gaubert & Oleg Itskhoki, 2021. "Granular Comparative Advantage," Journal of Political Economy, University of Chicago Press, vol. 129(3), pages 871-939.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/712444
    DOI: 10.1086/712444
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    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F10 - International Economics - - Trade - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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