On the impact of trade on industrial structures: The role of entry cost heterogeneity

Daisuke Oyama, Yasuhiro Sato, Takatoshi Tabuchi and Jacques Thisse
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Yasuhiro Sato: Graduate School of Economics - Osaka University - Osaka University [Osaka]

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Abstract: This paper investigates the impacts of progressive trade openness, technological externalities, and heterogeneity of individuals on the formation of entrepreneurship in a two-country occupation choice model. We show that trade opening gives rise to a non-monotonic process of international specialization, in which the share of entrepreneurial firms in the large (small) country first increases (decreases) and then decreases (increases), with the global economy exhibiting first de-industrialization and then re-industrialization. When countries have the same size, we also show that strong technological externalities make the symmetric equilibrium unstable, generating equilibrium multiplicity, while sufficient heterogeneity of individuals leads to the stability and uniqueness of the symmetric equilibrium.

Keywords: entrepreneurship; trade liberalization; externality; heterogeneity; stability (search for similar items in EconPapers)
Date: 2009-02
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00566786v1
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Working Paper: On the impact of trade on industrial structures: The role of entry cost heterogeneity (2009)
Working Paper: On the impact of trade on industrial structures: The role of entry cost heterogeneity (2009)
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