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Theories of heterogeneous firms and trade

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  • Redding, Stephen

Abstract

This paper reviews the recent theoretical literature on heterogeneous firms and trade, whichemphasizes firm selection into international markets and reallocations of resources acrossfirms. We discuss the empirical challenges that motivated this research and its relationship totraditional trade theories. We examine the implications of firm heterogeneity for comparativeadvantage, market size, aggregate trade, the welfare gains from trade, and the relationshipbetween trade and income distribution. While a number of studies examine the endogenousresponse of firm productivity to trade liberalization, modelling internal firm organization andthe origins of firm heterogeneity remain interesting areas of ongoing research.

Suggested Citation

  • Redding, Stephen, 2010. "Theories of heterogeneous firms and trade," LSE Research Online Documents on Economics 48908, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:48908
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    File URL: http://eprints.lse.ac.uk/48908/
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    Keywords

    Heterogeneous firms; international trade; within-industry reallocation; selection into exporting;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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