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On the impact of competition on trade and firm location

  • Toshihiro Okubo

    ()

    (Keio University, Japan)

  • Pierre Picard

    ()

    (CREA, Université du Luxembourg)

  • Jacques-François Thisse

    ()

    (Université catholique de Louvain)

We study how the level of trade costs and the intensity of competition interact to explain the nature and intensity of trade within a given industry and the location of firms across countries. As trade costs decrease from very high to very low values, the global economy moves from autarky to two-way trade, through one-way trade from the larger to the smaller region. By exploring the intensive and extensive margins of exports, we investigate how the intensity of trade reacts to the degree of competitiveness. Furthermore, when firms are free to change location, they flow from the small to the large country, and the larger country is always a net exported on the manufactured good. Firms located in the big country have a bigger size than those located in the small one. Under one-way trade, the relocation of firms changes their attitude toward export.

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File URL: http://wwwfr.uni.lu/content/download/69327/872164/file/2014-05_On%20the%20impact%20of%20competition%20on%20trade%20and%20firm%20location.pdf
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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 14-05.

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Date of creation: 2014
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Handle: RePEc:luc:wpaper:14-05
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  1. Ottaviano, Gianmarco & Thisse, Jacques-François, 2003. "Agglomeration and Economic Geography," CEPR Discussion Papers 3838, C.E.P.R. Discussion Papers.
  2. Bresnahan, T.F & Reiss, P.C., 1989. "Entry And Competition In Concentrated Markets," Papers 151, Stanford - Studies in Industry Economics.
  3. 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.
  4. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  5. Volker Nocke, 2003. "A Gap for Me: Entrepreneurs and Entry," PIER Working Paper Archive 05-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 29 Sep 2005.
  6. Behrens, Kristian, 2004. "Agglomeration without trade: how non-traded goods shape the space-economy," Journal of Urban Economics, Elsevier, vol. 55(1), pages 68-92, January.
  7. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
  8. Natalie Chen & Jean Imbs & Andrew Scott, 2006. "The dynamics of trade and competition," Working Paper Research 91, National Bank of Belgium.
  9. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  10. Pierre M. Picard & Toshihiro Okubo, 2011. "Firms Location under Demand Heterogeneity," CREA Discussion Paper Series 11-07, Center for Research in Economic Analysis, University of Luxembourg.
  11. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  12. OKUBO, Toshihiro & PICARD, Pierre M. & THISSE, Jacques-François, . "The spatial selection of heterogeneous firms," CORE Discussion Papers RP 2257, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Behrens, Kristian, 2005. "Market size and industry location: Traded vs non-traded goods," Journal of Urban Economics, Elsevier, vol. 58(1), pages 24-44, July.
  14. Weinstein, David E., 1992. "Competition and unilateral dumping," Journal of International Economics, Elsevier, vol. 32(3-4), pages 379-388, May.
  15. Behrens, Kristian, 2005. "How endogenous asymmetries in interregional market access trigger regional divergence," Regional Science and Urban Economics, Elsevier, vol. 35(5), pages 471-492, September.
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