Product Mix and Firm Productivity Responses to Trade Competition
53 Pages Posted: 18 Jul 2016
There are 3 versions of this paper
Product Mix and Firm Productivity Responses to Trade Competition
Product Mix and Firm Productivity Responses to Trade Competition
Date Written: July 2016
Abstract
We document how demand shocks in export markets lead French multi-product exporters to re-allocate the mix of products sold in those destinations. In response to positive demand shocks, those French firms skew their export sales towards their best performing products; and also extend the range of products sold to that market. We develop a theoretical model of multi-product firms and derive the specific demand and cost conditions needed to generate these product-mix reallocations. Our theoretical model highlights how the increased competition from demand shocks in export markets - and the induced product mix reallocations - induce productivity changes within the firm. We then empirically test for this connection between the demand shocks and the productivity of multi-product firms exporting to those destinations. We find that the effect of those demand shocks on productivity are substantial - and explain an important share of aggregate productivity fluctuations for French manufacturing.
JEL Classification: F1
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Product Mix and Firm Productivity Responses to Trade Competition
This is a CEPR Discussion Paper. CEPR charges a fee of $8.00 for this paper.
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.
