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Comparative Advantage and Within-Industry Firms Performance

  • Crozet, Matthieu
  • Trionfetti, Federico

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 rela- tive 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 us- ing data for a large panel of European firms, supports these predic- tions. 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.

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Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 1101.

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Length: 46 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:cpm:docweb:1101
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