On the impact of competition on trade and firm location

Toshihiro Okubo, Pierre Picard and Jacques Thisse

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: We study how the level of trade costs and the intensity of competition interact to explain the nature and intensity of trade within a given industry and the location of firms across countries. As trade costs decrease from very high to very low values, the global economy moves from autarky to two-way trade, through one-way trade from the larger to the smaller region. By exploring the intensive and extensive margins of exports, we investigate how the intensity of trade reacts to the degree of competitiveness. Furthermore, when firms are free to change location, they flow from the small to the large country, and the larger country is always a net exported on the manufactured good. Firms located in the big country have a bigger size than those located in the small one. Under one-way trade, the relocation of firms changes their attitude toward export.

Keywords: trade; competition; firm location; capital mobility (search for similar items in EconPapers)
JEL-codes: F12 H22 H87 R12 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-bec, nep-cse, nep-geo and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://hdl.handle.net/10993/17988 (application/pdf)

Related works:
Journal Article: ON THE IMPACT OF COMPETITION ON TRADE AND FIRM LOCATION (2014)
Working Paper: On the impact of competition on trade and firm location (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:14-05

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