Do firms become more efficient after becoming exporters? Widespread empirical evidence indicates that exporting manufacturers achieve higher productivity levels than non-exporting manufacturers. Two explanations, self-selection and learning-by-exporting, are proposed in the literature, with the...

type="main" <title type="main">ABSTRACT</title> <p>According to conventional home market effects, free trade tends to shrink the market share for a smaller economy in differentiated manufacturing goods, and in the extreme, leads to a complete hollowing out of the industry. Departing from the original Helpman–Krugman...</p>

In a two-country monopolistic competition general equilibrium model, we consider two types of firms: big with higher fixed cost but lower marginal cost, and small with lower fixed cost but with high marginal cost. We prove that free trade may not always benefit the big-country and/or big firms....