Product Mix and Firm Productivity Responses to Trade Competition

Thierry Mayer, Marc Melitz and Gianmarco Ottaviano

No 22433, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document how demand shocks in export markets lead French multi-product exporters to re-allocate the mix of products sold in those destinations. In response to positive demand shocks, those French firms skew their export sales towards their best-performing products; and also extend the range of products sold to that market. We develop a theoretical model of multiproduct firms and derive the specific demand conditions needed to generate these product-mix reallocations. These demand conditions are associated with endogenous price elasticities that satisfy Marshall’s Second Law of Demand (the price elasticity of demand decreases with consumption). Under these demand conditions, our theoretical model highlights how the increased competition from demand shocks in export markets – and the induced product mix reallocations – induce productivity changes within the firm. We then empirically test for this connection between the demand shocks and the productivity of multi-product firms exporting to those destinations. We find that the effect of those demand shocks on productivity is substantial – and explain an important share of aggregate productivity fluctuations for French manufacturing.

JEL-codes: D24 F12 (search for similar items in EconPapers)
Date: 2016-07
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-int and nep-tid
Note: ITI PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (96)

Published as Thierry Mayer & Marc J. Melitz & Gianmarco I. P. Ottaviano, 2021. "Product Mix and Firm Productivity Responses to Trade Competition," The Review of Economics and Statistics, vol 103(5), pages 874-891.

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Related works:
Journal Article: Product Mix and Firm Productivity Responses to Trade Competition (2021)
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2021)
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2021)
Working Paper: Product mix and firm productivity responses to trade competition (2016)
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2016)
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2016)
Working Paper: Product mix and firm productivity responses to trade competition (2016)
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2016)
Working Paper: Product Mix and Firm Productivity Responses to Trade Competition (2016)
Working Paper: Product mix and firm productivity responses to trade competition (2016)
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