IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this book chapter or follow this series

The Impact of Trade on Plant Scale, Production-Run Length and Diversification

In: Producer Dynamics: New Evidence from Micro Data

  • John Baldwin
  • Wulong Gu

This paper examines the effect of trade liberalization on plant scale, production-run length and product diversification. We first develop a model of trade in differentiated products with multi-product plants. We then present empirical evidence using a large panel of Canadian manufacturing plants and their experience with the 1989 Canada-U.S. Free Trade Agreement (FTA). The model predicts that the bilateral tariff reduction reduces the product diversification of exporting plants, increases the production-run length and has an ambiguous effect on the size of those plants. It also reduces the product diversification and size of non-exporting plants, and has no effect on the production-run length of those plants. The empirical evidence on non-exporting plants provides broad support for the model. The evidence on exporting plants shows that exporters reduce product diversification, and increase production-run length and plant size, but those changes do not appear to be related to tariff cuts. Once in the export markets, plants respond to forces other than tariff cuts. Further tariff cuts have less effect on those plants.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/chapters/c0502.pdf
Download Restriction: no

as
in new window

This chapter was published in:
  • Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Producer Dynamics: New Evidence from Micro Data," NBER Books, National Bureau of Economic Research, Inc, number dunn05-1, August.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 0502.
    Handle: RePEc:nbr:nberch:0502
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
    2. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    3. Andrew Bernard & J. Bradford Jensen & Peter Schott, 2003. "Falling Trade Costs, Heterogeneous Firms, and Industry Dynamics," IFS Working Papers W03/10, Institute for Fiscal Studies.
    4. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
    5. Gu, Wulong & Caves, Richard & Baldwin, John R., 2005. "Responses to Trade Liberalization: Changes in Product Diversification in Foreign- and Domestic-controlled Plants," Economic Analysis (EA) Research Paper Series 2005031e, Statistics Canada, Analytical Studies Branch.
    6. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999. "Agglomeration and Trade Revisited," CIRJE F-Series CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
    7. repec:cup:cbooks:9780521305525 is not listed on IDEAS
    8. Chad Syverson, 2003. "Product Substitutability and Productivity Dispersion," NBER Working Papers 10049, National Bureau of Economic Research, Inc.
    9. Richard Harris, 1983. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," Working Papers 524, Queen's University, Department of Economics.
    10. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d\'Agliano, University of Milano.
    11. Daniel Trefler, 2006. "The Long and Short of the Canada-U.S. Free Trade Agreement," STICERD - Economics of Industry Papers 41, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    12. Jeffrey Campbell, 2000. "Market Size Matters," Econometric Society World Congress 2000 Contributed Papers 1225, Econometric Society.
    13. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    14. Baldwin, John R., 2004. "Trade Liberalization: Export-market Participation, Productivity Growth and Innovation," Economic Analysis (EA) Research Paper Series 2004027e, Statistics Canada, Analytical Studies Branch.
    15. John R. Baldwin & Ron S. Jarmin & Jianmin Tang, 2004. "Small North American Producers Give Ground in the 1990s," Small Business Economics, Springer, vol. 23(4), pages 349-361, November.
    16. repec:rus:hseeco:122439 is not listed on IDEAS
    17. Gu, Wulong & Baldwin, John R., 2003. "Participation in Export Markets and Productivity Performance in Canadian Manufacturing," Economic Analysis (EA) Research Paper Series 2003011e, Statistics Canada, Analytical Studies Branch.
    18. John Baldwin & Wulong Gu, 2003. "Export-market participation and productivity performance in Canadian manufacturing," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 634-657, August.
    19. repec:cup:cbooks:9780521633574 is not listed on IDEAS
    20. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April.
    21. repec:cup:cbooks:9780521465618 is not listed on IDEAS
    22. Baldwin, John R. & Harchaoui, Tarek, 2002. "Productivity Growth in Canada," Productivity Growth in Canada, Statistics Canada, Economic Analysis, number stcb6e, December.
    23. Rama, Ed & Sabourin, David & Baldwin, John R., 1999. "Growth of Advanced Technology Use in Canadian Manufacturing During the 1990's," Analytical Studies Branch Research Paper Series 1999105e, Statistics Canada, Analytical Studies Branch.
    24. Beckstead, Desmond & Caves, Richard & Baldwin, John R., 2002. "Changes in the Diversification of Canadian Manufacturing Firms and Plants (1973-1997): A Move to Specialization," Analytical Studies Branch Research Paper Series 2002179e, Statistics Canada, Analytical Studies Branch.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:0502. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.