Heterogeneous Firms and Trade

65 Pages Posted: 22 Dec 2012 Last revised: 19 Jun 2023

See all articles by Marc J. Melitz

Marc J. Melitz

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

Stephen J. Redding

Princeton University

Multiple version iconThere are 2 versions of this paper

Date Written: December 2012

Abstract

This paper reviews the new approach to international trade based on firm heterogeneity in differentiated product markets. This approach explains a variety of features exhibited in disaggregated trade data, including the higher productivity of exporters relative to non-exporters, within-industry reallocations of resources following trade liberalization, and patterns of trade participation across firms and destination markets. Accounting for these empirical patterns reveals new mechanisms through which the aggregate economy is affected by trade liberalization, including endogenous increases in average industry and firm productivity.

Suggested Citation

Melitz, Marc J. and Melitz, Marc J. and Redding, Stephen J., Heterogeneous Firms and Trade (December 2012). NBER Working Paper No. w18652, Available at SSRN: https://ssrn.com/abstract=2192825

Marc J. Melitz (Contact Author)

Centre for Economic Policy Research (CEPR)

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Harvard University - Department of Economics ( email )

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Stephen J. Redding

Princeton University ( email )

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