Heterogeneous Firms and Trade

66 Pages Posted: 1 Feb 2013

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: January 2013

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.

Keywords: firm heterogeneity, international trade, productivity

JEL Classification: F10, F12, F14

Suggested Citation

Melitz, Marc J. and Melitz, Marc J. and Redding, Stephen J., Heterogeneous Firms and Trade (January 2013). CEPR Discussion Paper No. DP9317, Available at SSRN: https://ssrn.com/abstract=2210288

Marc J. Melitz (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-8297 (Phone)
617-417-6536 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Stephen J. Redding

Princeton University ( email )

Princeton, NJ 08544-1021
United States

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

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