Comparative Advantage and Heterogeneous Firms

58 Pages Posted: 2 Sep 2004 Last revised: 27 Aug 2010

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 2 versions of this paper

Date Written: August 2004

Abstract

This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety. The paper demonstrates that firm reactions to trade liberalization generate endogenous Ricardian productivity responses at the industry level that magnify countries' comparative advantage. Focusing on the wide range of firm-level reactions to falling trade costs, the model also shows that, as trade costs fall, firms in comparative advantage industries are more likely to export, that relative firm size and the relative number of firms increases more in comparative advantage industries and that job turnover is higher in comparative advantage industries than in comparative disadvantage industries.

Suggested Citation

Bernard, Andrew B. and Redding, Stephen J. and Schott, Peter K., Comparative Advantage and Heterogeneous Firms (August 2004). NBER Working Paper No. w10668. Available at SSRN: https://ssrn.com/abstract=579813

Andrew B. Bernard (Contact Author)

Dartmouth College - Tuck School of Business ( email )

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

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR) ( email )

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Stephen J. Redding

Princeton University ( email )

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

Peter K. Schott

Yale University - School of Management ( email )

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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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