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Comparative Advantage and Within-Industry Firms Performance

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  • Matthieu Crozet
  • Federico Trionfetti

Abstract

Guided by empirical evidence we consider firms heterogeneity in terms of factor intensity. We show that Heckscher-Ohlin comparative advantage and firm-level relative factor-intensity interact to jointly explain the observed differences in relative sales. Firms whose relative factor-intensity matches up with the comparative advantage of the country have lower relative marginal costs and larger relative sales than firms who do not. Our empirical analysis, conducted using data for a large panel of European firms, supports these predictions. Our findings also provide an original firm-level verification of the Heckscher-Ohlin model based on the effect of comparative advantage on firms relative sales.

Suggested Citation

  • Matthieu Crozet & Federico Trionfetti, 2011. "Comparative Advantage and Within-Industry Firms Performance," Working Papers 2011-01, CEPII research center.
    • Handle: RePEc:cii:cepidt:2011-01
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    Cited by:

    1. Unjung Whang, 2016. "Skilled-Labor Intensity Differences Across Firms, Endogenous Product Quality, and Wage Inequality," Open Economies Review, Springer, vol. 27(2), pages 251-292, April.

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    More about this item

    Keywords

    Factor intensity; Firms heterogeneity; Test of trade theories;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade

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