Work

Restoring the Product Variety and Pro-competitive Gains from Trade with Heterogeneous Firms and Bounded Productivity

Year: 2014

Type: report

Abstract: The monopolistic competition model in international trade offers three sources of gains from trade that do not arise in competitive models: expansion in product variety; a pro-competitive reduction in the markups charged by firms; and the self-selection of more efficient firms into exporting.Recent literature on trade with heterogeneous firms has emphasized the third of these effects, and the first two effects are ruled out when using a Pareto distribution for productivity with a support that is unbounded above.The goal of this paper is to restore a role for product variety and pro-competitive gains from trade by using a bounded Pareto distribution for productivity.

Source: National Bureau of Economic Research

DOI: 10.3386/w19833

Author: Robert Feenstra

Institutions: National Bureau of Economic Research, University of California, Davis

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: National Science Foundation

OpenAlex ID: W2890501490

Cites: 44

Cited by: 33

Related to: 10