Comparative Advantage and Heterogeneous Firms

Andrew Bernard, Stephen Redding and Peter Schott

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper presents a model of international trade that features heterogeneous firms, relativeendowment differences across countries, and consumer taste for variety. The paper demonstrates thatfirm reactions to trade liberalization generate endogenous Ricardian productivity responses at theindustry level that magnify countries' comparative advantage. Focusing on the wide range of firmlevelreactions to falling trade costs, the model also shows that, as trade costs fall, firms incomparative advantage industries are more likely to export, that relative firm size and the relativenumber of firms increases more in comparative advantage industries and that job turnover is higher incomparative advantage industries than in comparative disadvantage industries.

Keywords: Heckscher-Ohlin; international trade; inter-industry trade; intra-industry trade; trade costs; entry and exit (search for similar items in EconPapers)
JEL-codes: F11 F12 L11 (search for similar items in EconPapers)
Date: 2004-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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https://cep.lse.ac.uk/pubs/download/dp0643.pdf (application/pdf)

Related works:
Journal Article: Comparative Advantage and Heterogeneous Firms (2007)
Working Paper: Comparative Advantage and Heterogenous Firms (2004)
Working Paper: Comparative advantage and heterogeneous firms (2004)
Working Paper: Comparative advantage and heterogeneous firms (2004)
Working Paper: Comparative Advantage and Heterogeneous Firms (2004)
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