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Firm Heterogeneity and the Localization of Economic Activities

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  • Pamela Bombarda

    () (THEMA, Universite de Cergy-Pontoise)

Abstract

This paper examines how market access strategies, export and FDI, respond to changes in level of integration. Empirical evidence shows that both firm exports and multinational activity are affected by trade liberalization episode. To account for the strong positive correlation between export and FDI, we develop a general equilibrium model that features firm heterogeneity, trade and FDI with final and intermediate products. Different spatial networks are considered to quantify the effect of a preferential trade agreement (PTA) on supply mode decisions, for both partner and excluded countries. The model sheds new light on the mechanisms through which geography reshapes the concentration of economic activities inside and outside the PTA area.

Suggested Citation

  • Pamela Bombarda, 2013. "Firm Heterogeneity and the Localization of Economic Activities," THEMA Working Papers 2013-25, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2013-25
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    References listed on IDEAS

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    More about this item

    Keywords

    Heterogeneous firms; PTA; Spatial networks; Intrafirm trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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