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Global firms

Listed author(s):
  • Bernard, Andrew B.
  • Jensen, J. Bradford
  • Redding, Stephen J.
  • Schott, Peter K.

Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now standard heterogeneous firm model posits a continuum of firms that compete under monopolistic competition (and hence are measure zero) and decide whether to export to foreign markets. However, much of international trade is dominated by a few “global firms,” which participate in the international economy along multiple margins and are large relative to the markets in which they operate. We outline a framework that allows firms to be of positive measure and to decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. We use this framework to interpret features of U.S. firm and trade transactions data and highlight interdependencies across these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics, and explaining their dominance of aggregate international trade.

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File URL: http://eprints.lse.ac.uk/66437/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 66437.

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Length: 59 pages
Date of creation: Apr 2016
Handle: RePEc:ehl:lserod:66437
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