Multi-Product Firms and Trade Liberalization

Multi-Product Firms and Trade Liberalization∗

This paper develops a general equilibrium model of international trade that features selection across firms, products and countries. Firms’export decisions depend on a combination of firm “productivity” and firm-product-country “consumer tastes”, both of which are stochastic and unknown prior to the payment of a sunk cost of entry. Trade liberalization induces endogenous reallocations of resour...

No 769 December 2006 Multi - Product Firms and Trade Liberalization

This paper develops a general equilibrium model of multi-product firms and analyzes their behavior during trade liberalization. Firm productivity in a given product is modeled as a combination of firm-level “ability” and firmproduct-level “expertise”, both of which are stochastic and unknown prior to the firm’s payment of a sunk cost of entry. Higher firm-level ability raises a firm’s productiv...

Web-Based Technical Appendix: Multi-Product Firms and Trade Liberalization

This appendix contains additional technical derivations and supplementary material for the main paper. Section 1 presents model solutions for the special case where firm productivity and consumer tastes are Pareto distributed. Section 2 contains the complete proof of Proposition 3 in the paper. Section 3 shows that it is straightforward to extend the model to introduce dependence in consumer ta...

Technical Appendix: Multi-Product Firms and Trade Liberalization (Not For Publication)

Small-Scale Firms and Trade Liberalization

We explore how integrating into the world economy affects the incomes of manufacturers in less developed countries (LDCs). We show that cutting back trade barriers has asymmetric effects on the incomes of the two typical groups of entrepreneurs. Whereas access to foreign markets benefits those entrepreneurs who are able to run large-scale factories, credit-rationed entrepreneurs running a micro...