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Comparative Advantage and Within-Industry Firms Performance

  • Matthieu Crozet
  • Federico Trionfetti

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.

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File URL: http://degit.sam.sdu.dk/papers/degit_16/c016_019.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c016_019.

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Length: 46 pages
Date of creation: Sep 2011
Handle: RePEc:deg:conpap:c016_019
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  1. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
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