Theories of Heterogeneous Firms and Trade

39 Pages Posted: 24 Aug 2010

Multiple version iconThere are 3 versions of this paper

Date Written: August 2010

Abstract

This paper reviews the recent theoretical literature on heterogeneous firms and trade, which emphasizes firm selection into international markets and reallocations of resources across firms. We discuss the empirical challenges that motivated this research and its relationship to traditional trade theories. We examine the implications of firm heterogeneity for comparative advantage, market size, aggregate trade, the welfare gains from trade, and the relationship between trade and income distribution. While a number of studies examine the endogenous response of firm productivity to trade liberalization, modeling internal firm organization and the origins of firm heterogeneity remain interesting areas of ongoing research.

Keywords: Heterogeneous Firms, International Trade, Selection into Exporting, Within-industry Reallocation

JEL Classification: F12, F16, L22

Suggested Citation

Redding, Stephen J., Theories of Heterogeneous Firms and Trade (August 2010). CEPR Discussion Paper No. DP7961, Available at SSRN: https://ssrn.com/abstract=1661564

Stephen J. Redding (Contact Author)

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

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