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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. Baldwin, Richard & Harrigan, James, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," CEPR Discussion Papers 6368, C.E.P.R. Discussion Papers.
  2. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of 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. 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.
  5. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
  6. Bresnahan, T.F & Reiss, P.C., 1989. "Entry And Competition In Concentrated Markets," Papers 151, Stanford - Studies in Industry Economics.
  7. BEHRENS, Kristian, . "Market size and industry location: Traded vs non-traded goods," CORE Discussion Papers RP 1779, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. OTTAVIANO, Gianmarco & THISSE, Jacques-François, . "Agglomeration and economic geography," CORE Discussion Papers RP 1725, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Natalie Chen & Jean Imbs & Andrew Scott, 2006. "The dynamics of trade and competition," Working Paper Research 91, National Bank of Belgium.
  10. Toshihiro Okubo & Pierre M. Picard & Jacques-François Thisse, 2008. "The spatial selection of heterogeneous firms," Discussion Paper Series 229, Research Institute for Economics & Business Administration, Kobe University.
  11. Volker Nocke, 2003. "A Gap for Me: Entrepreneurs and Entry," PIER Working Paper Archive 03-019, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  12. Weinstein, David E., 1992. "Competition and unilateral dumping," Journal of International Economics, Elsevier, vol. 32(3-4), pages 379-388, May.
  13. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  14. BEHRENS, Kristian, . "How endogenous asymmetries in interregional market access trigger regional divergence," CORE Discussion Papers RP 1778, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. 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.
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