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International trade and technological competition in markets with dynamic increasing returns

Luca Fontanelli, Mattia Guerini and Mauro Napoletano ()
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Mauro Napoletano: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: We build a simple international trade model to study how the interaction between imperfect market selection and technological learning jointly shapes trade patterns as well as firm and industry dynamics. The model features two countries populated by firms heterogeneous in their productivity and size. Market selection is driven by a finite pairwise Pólya urn process, while a geometric random walk characterizes the idiosyncratic cumulative firm learning process. We show that the model is able to jointly reproduce a wide ensemble of stylized facts concerning intra-industry trade, industry and firm dynamics as well as realistic dynamics of export and productivity leadership at the country level. A series of sensitivity exercises on the degree of trade openness and the tightness of the market selection process allow us to draw interesting policy insights on concentration, volatility and the dynamics of international leadership in both export shares and aggregate productivity.

Date: 2023-04
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Published in Journal of Economic Dynamics and Control, 2023, 149 ((C)), pp.104619. ⟨10.1016/j.jedc.2023.104619⟩

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Journal Article: International trade and technological competition in markets with dynamic increasing returns (2023) Downloads
Working Paper: International trade and technological competition in markets with dynamic increasing returns (2023)
Working Paper: International trade and technological competition in markets with dynamic increasing returns (2022) Downloads
Working Paper: International trade and technological competition in markets with dynamic increasing returns (2022) Downloads
Working Paper: International Trade and Technological Competition in Markets with Dynamic Increasing Returns (2021) Downloads
Working Paper: International trade and technological competition in markets with dynamic increasing returns (2021) Downloads
Working Paper: International trade and technological competition in markets with dynamic increasing returns (2021) Downloads
Working Paper: International Trade and Technological Competition in Markets with Dynamic Increasing Returns (2021) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04531047

DOI: 10.1016/j.jedc.2023.104619

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