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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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  1. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
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  3. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2004. "Comparative Advantage and Heterogeneous Firms," NBER Working Papers 10668, National Bureau of Economic Research, Inc.
  4. Jean Imbs & Isabelle Mejean, 2008. "Elasticity Optimism," EIEF Working Papers Series 0805, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2008.
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  6. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
  7. Paula Bustos, 2009. "Trade Liberalization, Exports and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinean Firms," 2009 Meeting Papers 1029, Society for Economic Dynamics.
  8. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
  9. Davis, D.R. & Weinstein, D.E., 1999. "An Account of Global Factor Trade," Working Papers 435, Research Seminar in International Economics, University of Michigan.
  10. Hartmut Egger & Udo Kreickemeier, 2009. "Firm Heterogeneity And The Labor Market Effects Of Trade Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 187-216, 02.
  11. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, 07.
  12. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  13. Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
  14. Jonathan Vogel & Arnaud Costinot, 2008. "Matching and Inequality in the World Economy," 2008 Meeting Papers 879, Society for Economic Dynamics.
  15. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
  16. Saxonhouse, Gary R, 1976. "Estimated Parameters as Dependent Variables," American Economic Review, American Economic Association, vol. 66(1), pages 178-83, March.
  17. Jean Fouré & Agnès Bénassy-Quéré & Lionel Fontagné, 2010. "The World Economy in 2050: a Tentative Picture," Working Papers 2010-27, CEPII research center.
  18. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  19. repec:clu:wpaper:0607-07 is not listed on IDEAS
  20. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
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