Market Size, Competition, and the Product Mix of Exporters

Thierry Mayer, Marc Melitz and Gianmarco Ottaviano

No 316, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: We build a theoretical model of multi-product firms that highlights how market size and geography (the market sizes of and bilateral economic distances to trading partners) affect both a firm\'s ex-ported product range and its exported product mix across market destinations (the distribution of sales across products for a given product range). We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destina-tions. Trade models based on exogenous markups cannot explain this strong significant link between destination market characteristics and the within-firm skewness of export sales (after controlling for bilateral trade costs. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity and how it responds to changes in that trading environment.

Pages: 41
Date: 2011-10-17
New Economics Papers: this item is included in nep-bec, nep-com and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

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https://www.dagliano.unimi.it/media/WP2011_316.pdf (application/pdf)

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Working Paper: Market size, competition, and the product mix of exporters (2011)
Working Paper: Market Size, Competition, and the Product Mix of Exporters (2011)
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Working Paper: Market Size, Competition, and the Product Mix of Exporters
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