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Product Mix and Firm Productivity Responses to Trade Competition

Thierry Mayer (), Marc Melitz and Gianmarco Ottaviano ()

Working Papers from CEPII research center

Abstract: We document how demand shocks in export markets lead French multi-product exporters to re-allocate the mix of products sold in those destinations. In response to positive demand shocks, those French firms skew their export sales towards their best performing products; and also extend the range of products sold to that market. We develop a theoretical model of multi-product firms and derive the specific demand and cost conditions needed to generate these product-mix reallocations. Our theoretical model highlights how the increased competition from demand shocks in export markets-and the induced product mix reallocations-induce productivity changes within the firm. We then empirically test for this connection between the demand shocks and the productivity of multi-product firms exporting to those destinations. We find that the effect of those demand shocks on productivity are substantial-and explain an important share of aggregate productivity fluctuations for French manufacturing.

Keywords: Multiproduct Firms; Productivity; Trade (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, nep-com, nep-cse, nep-eff and nep-int
Date: 2016-07
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Related works:
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2016) Downloads
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2016) Downloads
Working Paper: Product mix and firm productivity responses to trade competition (2016) Downloads
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2016) Downloads
Working Paper: Product mix and firm productivity responses to trade competition (2016) Downloads
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