Multi-Product Firms and Trade Liberalization

52 Pages Posted: 20 Sep 2009

See all articles by Andrew B. Bernard

Andrew B. Bernard

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Stephen J. Redding

Princeton University

Peter K. Schott

Yale University - School of Management; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Multiple version iconThere are 3 versions of this paper

Date Written: August 1, 2009

Abstract

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. Higher-productivity firms export a wider range of products to a larger set of countries than lower-productivity firms. Trade liberalization induces endogenous reallocations of resources that foster productivity growth both within and across firms. Empirically, we find key implications of the model to be consistent with U.S. trade data.

Keywords: heterogeneous firms, endogenous product scope, love of variety, core competency

JEL Classification: F12, F13, L11

Suggested Citation

Bernard, Andrew B. and Redding, Stephen J. and Schott, Peter K., Multi-Product Firms and Trade Liberalization (August 1, 2009). Tuck School of Business Working Paper No. 2009-70; US Census Bureau Center for Economic Studies Paper No. CES-WP 09-21. Available at SSRN: https://ssrn.com/abstract=1475707 or http://dx.doi.org/10.2139/ssrn.1475707

Andrew B. Bernard

Dartmouth College - Tuck School of Business ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-0302 (Phone)
603-646-9084 (Fax)

HOME PAGE: http://mba.tuck.dartmouth.edu/pages/faculty/Andrew.Bernard/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Stephen J. Redding

Princeton University ( email )

Princeton, NJ 08544-1021
United States

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

Peter K. Schott (Contact Author)

Yale University - School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-436-4260 (Phone)
203-436-6974 (Fax)

HOME PAGE: http://www.som.yale.edu/faculty/pks4

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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