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International Trade and Firms’ Heterogeneity Under Monopolistic Competition

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  • Sébastien Jean

Abstract

This article studies the interactions between international trade and firms' heterogeneity by proposing a tractable model consistent with the stylised facts. The model describes, in a general equilibrium framework, two economies producing and trading two goods, one homogeneous and the other differentiated. In the differentiated-good sector, firms are heterogeneous by their marginal cost, in a context of monopolistic competition with free-entry and exit. They incur a fixed production cost, but also a fixed cost if they choose to export. We show that trade in differentiated goods increases industry-wide efficiency, through two different logics: one defensive and import-driven; the other offensive and export-driven. Copyright Kluwer Academic Publishers 2002
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Suggested Citation

  • Sébastien Jean, 2000. "International Trade and Firms’ Heterogeneity Under Monopolistic Competition," Working Papers 2000-13, CEPII research center.
    • Handle: RePEc:cii:cepidt:2000-13
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    More about this item

    Keywords

    Monopolistic Competition; firms heterogeneity; product differentiation; Specialization; International trade; International trade models and databases; Globalization; International firms;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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