Comparative Advantage and Heterogeneous Firms
Open accessAbstract
This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety.The paper demonstrates that firm reactions to trade liberalization generate endogenous Ricardian productivity responses at the industry level that magnify countries' comparative advantage.Focusing on the wide range of firmlevel reactions to falling trade costs, the model also shows that, as trade costs fall, firms in comparative advantage industries are more likely to export, that relative firm size and the relative number of firms increases more in comparative advantage industries and that job turnover is higher in comparative advantage industries than in comparative disadvantage industries.
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The empirical methodology follows the literature that measures trade liberalization effects through tariff changes.
“The empirical methodology implemented in this paper follows the literature measuring the effects of trade liberalization on economic outcomes through changes in tariffs.10”
From Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms (2011) · cites this paper as [10]
The Introduction describes a theoretical model of responses to falling trade costs, and the passage under “Decline From” mentions historical declines in tariffs and transportation costs. Neither passage describes an empirical methodology that measures liberalization effects through tariff changes; searches for tariff changes and empirical methodology found no such account in our copy. (LLM, conf=0.76)
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Cites
Export Versus FDI with Heterogeneous Firms
Helpman, E., Melitz, M. J., & Yeaple, S. R. (2004) · American Economic Review · doi:10.1257/000282804322970814 · Cited by 4,090 · see citing works
The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity
Melitz, M. (2002) · doi:10.3386/w8881 · Cited by 2,996 · see citing works
Plants and Productivity in International Trade
Bernard, A. B., Eaton, J., Jensen, J. B., & Kortum, S. (2003) · American Economic Review · doi:10.1257/000282803769206296 · Cited by 2,980 · see citing works
Self-citationAnderson, J. E., & van Wincoop, E. (2004) · Journal of Economic Literature · doi:10.1257/0022051042177649 · Cited by 2,524 · see citing works
Flagged first, then by citations
Research works printed but not linked: 13
- Bartelsman, Eric and Mark Doms, (2000) 'Understanding Productivity: Lessons from Lon- gitudinal Microdata', Journal of Economic Literature, XXXVIII, 569-94.
- Bernard, Andrew B. and J. Bradford Jensen (1999) 'Exceptional Exporter Performance: Cause, Effect, or Both?', Journal of International Economics, 47(1), 1-25.
- Bernard, Andrew B., and J. Bradford Jensen, (2004) 'Why Some Firms Export', Review of Economics and Statistics, 86(2): 561-569.
- Clerides, Sofronis, Lach, Saul and James Tybout, (1998) 'Is Learning by Exporting Im- portant? Micro-dynamic Evidence from Columbia, Mexico and Morocco', Quarterly Journal of Economics, 113, 903-47.
- Dunne, Timothy, Mark J. Roberts, and Larry Samuelson. (1989) 'The Growth and Failure of U.S. Manufacturing Plants', Quarterly Journal of Economics, Vol. 104, No. 4 , pp. 671-698.
- Dixit, Avinash and Victor Norman, (1980) The Theory of International Trade, Cambridge University Press: Cambridge UK.
- Flam, Harry and Elhanan Helpman, (1987) 'Industrial Policy Under Monopolistic Compe- tition', Journal of International Economics, 22, 79-102.
- Helpman, Elhanan and Paul Krugman, (1985) Market Structure and Foreign Trade: In- creasing Returns, Imperfect Competition and the International Economy, MIT Press, Cambridge, MA.
- Hopenhayn, Hugo. (1992) 'Entry, Exit, and Firm Dynamics in Long Run Equilibrium', Econometrica, 60(5), 1127-1150.
- Jovanovic, Boyan. (1982) 'Selection and the Evolution of Industry', Econometrica, vol. 50, no. 3, May, 649-70.
- Markusen, James R. and Venables, Anthony J. (2000) 'The Theory of Endowment, Intra- industry and Multi-national Trade', Journal of International Economics, 52, 209-34.
- Pavcnik, N (2002) 'Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants', Review of Economic Studies, 69(1), 245-76.
- Roberts, Mark J. and James Tybout, (1997a) 'The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs', American Economic Review, 87(4), 545-64.
Cited by
Sorted by citations
Export Versus FDI with Heterogeneous Firms
Helpman, E., Melitz, M. J., & Yeaple, S. R. (2004) · American Economic Review · doi:10.1257/000282804322970814 · Cited by 4,090 · see citing works
Plants and Productivity in International Trade
Bernard, A. B., Eaton, J., Jensen, J. B., & Kortum, S. (2003) · American Economic Review · doi:10.1257/000282803769206296 · Cited by 2,980 · see citing works
Self-citationBustos, P. (2011) · American Economic Review · doi:10.1257/aer.101.1.304 · Cited by 1,552 · see citing works
- Authors
- BERNARD, A. B., REDDING, S. J., & SCHOTT, P. K.
- Affiliations
- Dartmouth College (US)
- Centre for Economic Policy Research (GB)
- National Bureau of Economic Research (US)
- Venue
- Review of Economic Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2007-01
- Volume
- 74
- Issue
- 1
- Pages
- 31-66
- ISSN
- 0034-6527 (ISSN-L)
- 1467-937X
- OpenAlex
- W2889547665
- Cited by
- 958
- References
- 4
- Citations by year
- 2026: 15 · 2025: 19 · 2024: 30 · 2023: 30 · 2022: 28 · 2021: 32 · 2020: 25 · 2019: 41 · 2018: 43 · 2017: 46 · 2016: 51 · 2015: 56 · 2014: 57 · 2013: 62 · 2012: 82
- FWCI
- 60.55
- Type
- journal article
- Language
- en
- Open access
- green
- doi.org
- Locations
- The Review of Economic Studies (publishedVersion)
- National Bureau of Economic Research (publishedVersion)
- SSRN Electronic Journal (acceptedVersion)
- London School of Economics and Political Science Research Online (London School of Economics and Political Science) (acceptedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- London School of Economics and Political Science Research Online (London School of Economics and Political Science) (submittedVersion)
- Econstor (Econstor) (submittedVersion)
- Funders
- National Science Foundation (0241474)
- Yale University
- Dartmouth College
- London School of Economics and Political Science
- Yale School of Management
- Leverhulme Trust
- Raymond and Beverly Sackler Institute for Biological, Physical and Engineering Sciences, Yale University
- Economic and Social Research Council
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
- Social Sciences › Business, Management and Accounting › Strategy and Management › Global Trade and Competitiveness
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
- Keywords
- comparative advantage, heterogeneous firms, trade liberalization, factor abundance, factor intensity, trade costs, creative destruction, job turnover, aggregate productivity, real wages, welfare gains from trade, general equilibrium
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