Ricardian trade and the impact of domestic competition on export performance

Matilde Bombardini, Christopher J. Kurz and Peter Morrow

Canadian Journal of Economics, 2012, vol. 45, issue 2, 585-612

Abstract: This paper develops and empirically examines a model of relative productivity differences both within and across industries for small open economies. We decompose the effect of industry productivity on export performance into direct effect of own-firm productivity and an indirect effect of higher peer-firm productivity. In a sample of Chilean and Colombian plants, we find evidence of both a positive direct effect and a negative indirect effect. The empirical evidence supports our theoretical prediction that industry-specific factors of production and asymmetric substitutability between domestic and foreign varieties drive the negative indirect effect. JEL classification: F10, F11, F12

Date: 2012
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