Country Size, Trade, and Productivity: An Analysis of Heterogenous Firms and Differential Beachhead Costs

Anders Akerman and Rikard Forslid

No 2007:14, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: This paper modifies the heterogenous firms and trade model by Melitz (2003) by explicitly modelling the beachhead cost of a firm in a new market as a function of market size. This leads to several new predictions compared to the standard model. In particular, the productivity of non exporters and exporters depends on market size. Moreover, manufacturing export shares vary inversely with market size. However, export shares converge (upwards) as markets are integrated. The empirical part of the paper offers support for our model specification.

Keywords: Heterogenous Firms; Market Size; Beachhead Costs (search for similar items in EconPapers)
JEL-codes: H32 P16 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007-07-30
New Economics Papers: this item is included in nep-eff and nep-int
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:sunrpe:2007_0014

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