Restoring the Product Variety and Pro-competitive Gains from Trade with Heterogeneous Firms and Bounded Productivity

Robert Feenstra

No 19833, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The monopolistic competition model in international trade offers three sources of gains from trade that do not arise in competitive models: expansion in product variety; a pro-competitive reduction in the markups charged by firms; and the self-selection of more efficient firms into exporting. Recent literature on trade with heterogeneous firms has emphasized the third of these effects, and the first two effects are ruled out when using a Pareto distribution for productivity with a support that is unbounded above. The goal of this paper is to restore a role for product variety and pro-competitive gains from trade by using a bounded Pareto distribution for productivity.

JEL-codes: F12 (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-int and nep-tid
Note: ITI
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Citations: View citations in EconPapers (50)

Published as Robert C. Feenstra, 2017. "Restoring the Product Variety and Pro-competitive Gains from Trade with Heterogeneous Firms and Bounded Productivity," Journal of International Economics, .

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Journal Article: Restoring the product variety and pro-competitive gains from trade with heterogeneous firms and bounded productivity (2018)
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