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Market Size, Competition, and the Product Mix of Exporters

  • Thierry Mayer

    (Sciences-Po, CEPII and CEPR)

  • Marc J. Melitz

    (Harvard University, NBER and CEPR)

  • Gianmarco I.P. Ottaviano

    (Bocconi University, FEEM, Bruegel, CEPR and Centro Studi Luca d\'Agliano)

We build a theoretical model of multi-product firms that highlights how market size and geography (the market sizes of and bilateral economic distances to trading partners) affect both a firm\'s ex-ported product range and its exported product mix across market destinations (the distribution of sales across products for a given product range). We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destina-tions. Trade models based on exogenous markups cannot explain this strong significant link between destination market characteristics and the within-firm skewness of export sales (after controlling for bilateral trade costs. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity and how it responds to changes in that trading environment.

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File URL: http://www.dagliano.unimi.it/media/WP2011_316.pdf
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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 316.

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Length: 41
Date of creation: 17 Oct 2011
Date of revision:
Handle: RePEc:csl:devewp:316
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  1. 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.
  2. James Harrigan & Haiyan Deng, 2010. "China's Local Comparative Advantage," NBER Chapters, in: China's Growing Role in World Trade, pages 109-133 National Bureau of Economic Research, Inc.
  3. Jonathan Eaton & Samuel Kortum, 2004. "An Anatomy of International Trade: Evidence from French Firms," 2004 Meeting Papers 802, Society for Economic Dynamics.
  4. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers dp0495, Centre for Economic Performance, LSE.
  5. 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, October.
  6. Keith Head & Thierry Mayer, 2011. "Gravity, market potential and economic development," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 281-294, March.
  7. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," PIER Working Paper Archive 06-015, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  8. Matthieu Crozet & Pamina Koenig, 2008. "Structural Gravity Equations with Intensive and Extensive Margins," Working Papers 2008-30, CEPII research center.
  9. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
  10. Andrew.B Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in international trade," LSE Research Online Documents on Economics 3682, London School of Economics and Political Science, LSE Library.
  11. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2006. "Multi-Product Firms and Trade Liberalization," NBER Working Papers 12782, National Bureau of Economic Research, Inc.
  12. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," NBER Working Papers 16641, National Bureau of Economic Research, Inc.
  13. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12.
  14. 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.
  15. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
  16. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  17. Gregory Corcos & Massimo Del Gatto & Giordano Mion & Gianmarco I. P. Ottaviano, 2011. "Productivity and firm selection: quantifying the ‘new’ gains from trade," LSE Research Online Documents on Economics 42684, London School of Economics and Political Science, LSE Library.
  18. Allanson, Paul & Montagna, Catia, 2005. "Multiproduct firms and market structure: An explorative application to the product life cycle," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 587-597, September.
  19. Jan De Loecker & Pinelopi K. Goldberg & Amit K. Khandelwal & Nina Pavcnik, 2012. "Prices, Markups and Trade Reform," Working Papers 1403, Princeton University, Department of Economics, Center for Economic Policy Studies..
  20. repec:spo:wpecon:info:hdl:2441/10147 is not listed on IDEAS
  21. Iacovone, Leonardo & Javorcik, Beata S., 2008. "Multi-product exporters : diversification and micro-level dynamics," Policy Research Working Paper Series 4723, The World Bank.
  22. Eckel, Carsten & Neary, J. P., 2010. "Multi-product firms and flexible manufacturing in the global economy," Munich Reprints in Economics 20525, University of Munich, Department of Economics.
  23. Gu, Wulong & Baldwin, John R., 2006. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," Economic Analysis (EA) Research Paper Series 2006038e, Statistics Canada, Analytical Studies Branch.
  24. Thierry Mayer & Gianmarco Ottaviano, 2007. "The happy few: the internationalisation of European firms New facts based on firm-level evidence," Sciences Po publications info:hdl:2441/10147, Sciences Po.
  25. Robert Feenstra & Hong Ma, 2007. "Optimal Choice of Product Scope for Multiproduct Firms under Monopolistic Competition," NBER Working Papers 13703, National Bureau of Economic Research, Inc.
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