Market Size, Competition, and the Product Mix of Exporters

50 Pages Posted: 18 Apr 2011

See all articles by Thierry Mayer

Thierry Mayer

Institut d'Etudes Politiques de Paris (Sciences Po)

Marc J. Melitz

Centre for Economic Policy Research (CEPR); Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

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Date Written: April 2011

Abstract

We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.

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Suggested Citation

Mayer, Thierry and Melitz, Marc J. and Melitz, Marc J. and Ottaviano, Gianmarco I.P., Market Size, Competition, and the Product Mix of Exporters (April 2011). NBER Working Paper No. w16959, Available at SSRN: https://ssrn.com/abstract=1810313

Thierry Mayer (Contact Author)

Institut d'Etudes Politiques de Paris (Sciences Po) ( email )

Marc J. Melitz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
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National Bureau of Economic Research (NBER)

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Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )

Via Gobbi 5
Milan, 20136
Italy

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