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Quarterly Journal of Economics Vol. 126 No. 3 2011

Multiproduct Firms and Trade Liberalization

Andrew B. Bernard1,2,3,4,5,6; Stephen J. Redding1,2,3,4,5,6; Peter K. Schott1,2,3,4,5,6

1 Dartmouth College · 2 Pennsylvania State University · 3 National Bureau of Economic Research · 4 Yale University · 5 University of Pennsylvania · 6 London School of Economics and Political Science

open access

Abstract

This article develops a general equilibrium model of multiple-product, multiple-destination firms, which allows for heterogeneity in ability across firms and in product attributes within firms. Firms make endogenous entry and exit decisions and each surviving firm chooses optimally the range of products to supply to each market. We show that the resulting selection, across and within firms, provides a natural explanation for a number of features of trade across firms, products, and countries. Using both time-series changes in trade policy and cross-section variation in trade, we provide empirical evidence in support of the predictions of the model.

DOI
10.1093/qje/qjr021
Volume
126
Issue
3
Pages
1271-1318
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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