Inter-industry trade and heterogeneous firms: country size matters

Hangtian Xu () and Yiming Zhou
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Hangtian Xu: Hunan University

The Japanese Economic Review, 2023, vol. 74, issue 1, No 3, 57-81

Abstract: Abstract This study investigates how industries with different patterns of firm heterogeneity distribute across countries by developing a three-sector general-equilibrium model. We show that the larger country is more specialized in the industry with heterogeneous (homogeneous) firms when trade costs are low (high) and that an increase in the inter-industry difference in firm heterogeneity fosters the larger country’s degree of specialization in the industry with heterogeneous firms. We also disclose the wage inequality and trade patterns across countries and show how they respond to trade liberalization.

Keywords: Firm heterogeneity; Industrial specialization; Trade patterns (search for similar items in EconPapers)
JEL-codes: F12 F22 R12 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Inter-industry trade and heterogeneous firms: Country size matters (2019)
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DOI: 10.1007/s42973-020-00065-5

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