Large multiproduct exporters across rich and poor countries: Theory and evidence

Luca Macedoni

Journal of Development Economics, 2022, vol. 156, issue C

Abstract: I study the welfare effects of trade in the presence of large firms producing multiple varieties. Large multiproduct exporters dominate trade flows and their scope decisions have new implications for the welfare gains from trade. Using exporter-level data from 11 source countries, I document two stylized facts for large multiproduct exporters. First, the product scope increases with the level of development of the destination proxied by per capita income. Second, as evidence of cannibalization effects, a non-monotone, hump-shaped relationship exists between the product scope and market share of a firm. Guided by the evidence, I build a model in which income and cannibalization effects drive the scope decisions of large firms, and I derive a new formula for the welfare gains from trade. Ignoring income or cannibalization effects causes mismeasurement of the welfare gains. The sign and size of the mismeasurement are highly heterogeneous across countries.

Keywords: Multiproduct firms; Cannibalization effects; Non-homotheticity; Oligopoly; Welfare gains from trade (search for similar items in EconPapers)
JEL-codes: F12 F14 L10 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304387822000165
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:156:y:2022:i:c:s0304387822000165

DOI: 10.1016/j.jdeveco.2022.102835

Access Statistics for this article

Journal of Development Economics is currently edited by M. R. Rosenzweig

More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().