Monopolistic Competition, International Trade and Firm Heterogeneity - a Life Cycle Perspective
This paper presents a dynamic international trade model based on monopolistic competition, where observed intra-industry differences at a given point in time reflect different stages of the firm’s life cycle. New product varieties of still higher quality enter the market every period rendering old varieties obsolescent in a process of creative destruction. For given technology (variety) production costs decrease after an infant period due to learning. It is shown that several patterns of exports may arise depending primarily on the size of fixed trade costs. At a given point in time firms therefore differ due to different age, although all firms are symmetric in a life cycle perspective. The paper thus offers an alternative view on firm heterogeneity compared with other recent papers, where productivity differences appear as an outcome of a stochastic process.
|Date of creation:||01 May 2008|
|Contact details of provider:|| Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark|
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Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx
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"A Model Of Growth Through Creative Destruction,"
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"Competition, Imitation and Growth with Step-by-Step Innovation,"
Review of Economic Studies,
Oxford University Press, vol. 68(3), pages 467-492.
- Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Scholarly Articles 12375013, Harvard University Department of Economics.
- Montagna, Catia, 2001.
"Efficiency Gaps, Love of Variety and International Trade,"
London School of Economics and Political Science, vol. 68(269), pages 27-44, February.
- Catia Montagna, 1998. "Efficiency Gaps, Love of Variety and International Trade," Dundee Discussion Papers in Economics 090, Economic Studies, University of Dundee.
- Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
- C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September.
- Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
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