Year: 2018
Type: report
Abstract: In a stylized model, firms differentiate their products to escape import com-petition.Facing a nested CES demand, each firm chooses between a nest with competitors and its own nest under higher costs.The profit from differentiation is an inverted U-shaped function of firm productivity.It increases with import competition and is lower than the social benefit.Differentiation increases the gains from trade.In establishment data from China spanning its 2001 WTO accession, tariff cuts are associated with increases in productivity, introduction of new goods, switches to skillintensive sectors.Markups in the model explain the large increases in revenue productivity among small firms and input suppliers.
DOI: 10.3386/w24527
Authors: Ana Cecília Fieler, Ann Harrison
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2999688488