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International Trade and Firm-level Markups when Location and Quality Matter

Author Info

Listed author(s):
  • Flora Bellone

    (University of Nice Sophia Antipolis
    GREDEG CNRS)

  • Patrick Musso

    (University of Nice Sophia Antipolis
    GREDEG CNRS)

  • Lionel Nesta

    (OFCE Sciences Po.)

  • Frederic Warzynski

    (Aarhus University)

Abstract

In this paper, we estimate firm-level markups and test some micro-level predictions of a model of international trade with heterogenous firms and endogenous mark-ups. Our theoretical framework is an extended version of the Melitz and Ottaviano (2008) (MO) model which features both quality and spatial differentiation across firms. In line with our model, we find that firm markups are positively related to firm productivity and negatively related to the toughness of local competition. Considering the relationship between firm markups and exports, we find evidence that the quality enhancing channel overbalances the price depressing channel of global competition.

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File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2014-37.pdf
File Function: First version, 2014
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Paper provided by Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2014-37.

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Length: 40 pages
Date of creation: Nov 2014
Publication status: Forthcoming in Journal of Economic Geography
Handle: RePEc:gre:wpaper:2014-37
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Keywords: Markups; Productivity; Exports; Firm-level data; France;

Other versions of this item:

Find related papers by JEL classification:
  • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
  • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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Cited by:

  1. Sarah Guillou & Lionel Nesta, 2015. "Markup heterogeneity, export status ans the establishment of the euro," Sciences Po publications 2015-01, Sciences Po.
  2. Mauro Caselli & Stefano Schiavo & Lionel Nesta, 2017. "Markups and markdowns," Sciences Po publications 2017-11, Sciences Po.
  3. Chen, Natalie & Juvenal, Luciana, 2016. "Quality, trade, and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 100(C), pages 61-80.
  4. Osharin Alexander & Verbus Valery, 2015. "Heterogeneous consumers and market structure in a monopolistically competitive setting," EERC Working Paper Series 15/03e, EERC Research Network, Russia and CIS.

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