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Comparative Advantage and Within-Industry Firms Performance

Matthieu Crozet () and Federico Trionfetti

Working Papers from CEPII research center

Abstract: Guided by empirical evidence we consider firms heterogeneity in terms of factor intensity. We show that Heckscher-Ohlin comparative advantage and firm-level relative factor-intensity interact to jointly explain the observed differences in relative sales. Firms whose relative factor-intensity matches up with the comparative advantage of the country have lower relative marginal costs and larger relative sales than firms who do not. Our empirical analysis, conducted using data for a large panel of European firms, supports these predictions. Our findings also provide an original firm-level verification of the Heckscher-Ohlin model based on the effect of comparative advantage on firms relative sales.

Keywords: Factor intensity; Firms heterogeneity; Test of trade theories (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-int
Date: 2011-01
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Working Paper: Comparative Advantage and Within-Industry Firms Performance (2011) Downloads
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