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On the impact of competition on trade and firm location

Toshihiro Okubo (), Pierre Picard () and Jacques Thisse ()

CREA Discussion Paper Series from Center for Research in Economic Analysis, 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)
New Economics Papers: this item is included in nep-bec, nep-cse, nep-geo and nep-int
Date: 2014
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http://wwwfr.uni.lu/content/download/69327/872164/ ... 0firm%20location.pdf (application/pdf)

Related works:
Journal Article: ON THE IMPACT OF COMPETITION ON TRADE AND FIRM LOCATION (2014) Downloads
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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