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The between firm effect with multiproduct firms


  • Tuan Anh Luong


This paper studies the multi-product firms with two factors of production: unskilled and skilled labor (talent). Creating new products is skill intensive while production is less skill intensive. By introducing these two tasks a firm operates which act as two seemingly sectors, we show here a new effect: an increase in the skilled labor supply, relatively to unskilled labor, could reduce the number of products but increase the average scale per product. The relative strength of this effect depends on the degree of firm heterogeneity and the extent to which we allow multiple product within the firm. Moreover, the survival cut-off can be higher (or lower) if the fixed costs (or the variable costs) are lower. Economic integration influences this survival cut-off-only through the ratio of skilled labor to unskilled labor, but not the market size. This policy is welfare enhancing but the gains might be non uniformly distributed across agents. The paper also sheds light on the pattern of trade with only one industry.

Suggested Citation

  • Tuan Anh Luong, 2012. "The between firm effect with multiproduct firms," Globalization and Monetary Policy Institute Working Paper 122, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:122

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    References listed on IDEAS

    1. Marin, Dalia & Verdier, Thierry, 2012. "Globalization and the empowerment of talent," Journal of International Economics, Elsevier, vol. 86(2), pages 209-223.
    2. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
    3. Pinelopi K Goldberg & Amit K Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Multiproduct Firms and Product Turnover in the Developing World: Evidence from India," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 1042-1049, November.
    4. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
    5. 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.
    6. Baldwin, John R. & Jarmin , Ron S. & Tang, Jianmin, 2002. "The Trend to Smaller Producers in Manufacturing: A Canada/U.S. Comparison," Economic Analysis (EA) Research Paper Series 2002003e, Statistics Canada, Analytical Studies Branch.
    7. Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 417-474.
    8. 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.
    9. Iacovone, Leonardo & Javorcik, Beata S., 2008. "Multi-product exporters : diversification and micro-level dynamics," Policy Research Working Paper Series 4723, The World Bank.
    10. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
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    Trade ; Productivity ; Labor economics;

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