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Trade Liberalization, Division of Labor, and Firm Productivity

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  • Kamei, Keita

Abstract

In this paper, we construct a simplified general oligopolistic equilibrium (GOLE) model, in which Smith's (1776) famous theory of division of labor is embedded. In the absence of labor market integration with trading countries, we show that trade liberalization promotes a reduction of the number of firms in each country and a deeper division of labor, thus increasing firm productivity and improving welfare. Our model suggests a new interpretation of the trade-induced firm productivity effect.

Suggested Citation

  • Kamei, Keita, 2013. "Trade Liberalization, Division of Labor, and Firm Productivity," MPRA Paper 50301, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:50301
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    File URL: https://mpra.ub.uni-muenchen.de/50301/1/MPRA_paper_50301.pdf
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    References listed on IDEAS

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    1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    2. Chaney, Thomas & Ossa, Ralph, 2013. "Market size, division of labor, and firm productivity," Journal of International Economics, Elsevier, vol. 90(1), pages 177-180.
    3. Thomas Chaney & Ralph Ossa, 2013. "Market Size, Division of Labor, and Firm Productivity," Post-Print hal-03579667, HAL.
    4. 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.
    5. Joachim Wagner, 2016. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 2, pages 43-87, World Scientific Publishing Co. Pte. Ltd..
    6. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1271-1318.
    7. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    8. 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.
    9. J. Peter Neary, 2002. "The road less travelled : oligopoly and competition policy in general equilibrium," Working Papers 200222, School of Economics, University College Dublin.
    10. Avinash K. Dixit & Gene M. Grossman, 1982. "Trade and Protection with Multistage Production," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 583-594.
    11. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185-185.
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    Citations

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    Cited by:

    1. Kamei, Keita, 2014. "Pro-competitive effect, division of labor, and firm productivity," Economics Letters, Elsevier, vol. 124(1), pages 132-135.
    2. Shintaku, Koji, 2015. "Decision on the number of export markets firms enter and the optimal division of labor within firms," MPRA Paper 62138, University Library of Munich, Germany.
    3. Koji Shintaku, 2014. "The Division of Labor within Firms, Optimal Entry, and Firm Productivity," Discussion papers e-14-012, Graduate School of Economics Project Center, Kyoto University.

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    More about this item

    Keywords

    Trade Liberalization; Division of Labor; Firm Productivity; Cournot Competition; General Oligopolistic Equilibrium (GOLE);
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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