Trade, location, and multi-product firms

Rikard Forslid and Toshihiro Okubo

Regional Science and Urban Economics, 2023, vol. 100, issue C

Abstract: In this paper we study how trade liberalization affects the location and the product scope of firms. We find that the largest and most productive multi-product firms concentrate to the larger market as a result of trade liberalization. In the presence of relocation costs, we also find that these firms will expand their product scope in the larger market while firms in the smaller market will contract their product scope or expand it to a smaller degree. The adjustment of firms’ product scope can therefore be a substitute for firm relocation, and the cost of introducing new varieties becomes an important parameter, that influences the degree of agglomeration.

Keywords: Multi-product firms; Heterogeneous firms; Trade liberalization; Firm location (search for similar items in EconPapers)
JEL-codes: F12 F15 (search for similar items in EconPapers)
Date: 2023
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Related works:
Working Paper: Trade, Location and Multiproduct Firms (2019)
Working Paper: Trade, Location and Multiproduct Firms (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:100:y:2023:i:c:s0166046223000261

DOI: 10.1016/j.regsciurbeco.2023.103891

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