We investigate a dynamic Cournot duopoly with intraindustry trade, where firms invest in R&D to reduce the level of iceberg transportation costs. We adopt both open-loop and closed-loop equilibrium concepts, showing that a unique (saddle point) steady state exists in both cases. In the open-loop model, optimal investments and the resulting efficiency of transportation technology are independent...

We explore the effects of trade costs on markups by building a new model consistent with three stylized facts: exporters charge higher markups, markups increase when starting to export, and domestic and foreign sales are negatively correlated, which suggests decreasing returns. We calibrate the model to Chilean data, and simulate reductions in trade costs. Most markups increase along the intens...

The main purpose of this study is to illustrate, with a simple two-factor (skilled and unskilled labor) model, how a time-saving improvement in business-services trade benefitting from differences in time zones can have an impact on national factor markets. In doing so, we intend to capture the situation where the night-shift work in one country is replaced by the day-shift work in another coun...

A simple two-country model of economic geography is constructed in order to examine the effect of tariff competition on the spatial distribution of manufacturing activities as well as on welfare. We show that when the transport cost is sufficiently small, tariff competition with firm migration leads to a core-periphery economy, where one of the two countries imposes no tariff in Nash equilibriu...

This paper examines Foreign Direct Investment in the presence of labour unions. An oligopoly model is developed in which identical firms locate in a host country in order to export to a foreign country. These firms are unionised and compete with foreign firms on the foreign market. We consider the incentives for social dumping via restrictive labour legislation which we assume can be used by th...

This paper examines Foreign Direct Investment in the presence of labour unions. An oligopoly model is developed in which identical firms locate in a host country in order to export to a foreign country. These firms are unionised and compete with foreign firms on the foreign market. We consider the incentives for social dumping via restrictive labour legislation which we assume can be used by th...

Corporate organization varies within countries and between countries. We develop a theory which explains the variation in levels of decentralization across firms and links it to the trade environment that firms face. We introduce firms with internal hierarchies in a Melitz and Ottaviano (2008) model of international trade. We show that international trade increases the conflict of interest betw...

This paper discusses the impact of foreign direct investment (FDI) on market entry and welfare. It assumes that firms may enter markets in the first period as national firms only. In the second period, however, FDI is possible. The paper demonstrates that FDI reduces market entry because equilibrium profits in the second period decline with a decrease in the fixed cost of FDI. Therefore, compar...

This paper analyses the properties of standard estimators, tests, and con…dence sets (CS’s) in a class of models in which the parameters are unidenti…ed or weakly identi…ed in some parts of the parameter space. The paper also introduces a method to make the tests and CS’s robust to such identi…cation problems. The results apply to a class of extremum estimators and corresponding tests and CS’s,...

The performance of a kernel HAC estimator depends on the accuracy of the estimation of the normalized curvature, an unknown quantity in the optimal bandwidth represented as the spectral density and its derivative. This paper proposes to estimate it with a general class of kernels. The AMSE of the kernel estimator and the AMSE-optimal bandwidth are derived. It is shown that the optimal bandwidth...