Actual and potential competition is a powerful source of discipline on the pricing behavior of firms with market power. A simple model is developed that shows that the effects of import competition and domestic entry regulation on industry price-cost markups depend on country size. Barriers to...

This paper develops a model of international trade where firms are heterogeneous across capacity and productivity. A binding capacity constraint induces firms to raise prices in order to take advantage of access to new markets. This generates markets with a flexible competitive structure giving...

This paper develops a general equilibrium model of international trade that features selection across firms, products and countries. Firms’ export decisions depend on a combination of firm “productivity” and firm-product-country “consumer tastes”, both of which are stochastic and...

This paper develops a general equilibrium model of multi-product firms and analyzes their behavior during trade liberalization. Firm productivity in a given product is modeled as a combination of firm-level “ability” and firmproduct- level “expertise”, both of which are stochastic and...

Large multi-product firms dominate international trade flows. This paper documents new facts about multi-product manufacturing exporters that are not easily reconciled with existing multi-product models. Using novel linked production and export data at the firm-product level, we find that the...

We propose a stylized monopolistic competition model of international trade where firms differ with respect to the expected economic lifetime of their innovations. Upon entry, they receive a commonly observed signal which is updated over time. Jointly with partial irreversibility of investment,...

Arkolakis, Costinot and Rodriguez-Clare (ACR, 2012) prove that, conditional on the change in openness, the welfare gains from foreign trade reforms are quantitatively identical across single-sector trade models with radically different micro-foundations. We generalize this result to domestic and...

Recent quantitative trade models treat import tariffs as pure cost shifters so that their effects are similar to iceberg trade costs. We introduce revenue-generating import tariffs, which act as demand shifters, into the framework of Arkolakis, Costinot and Rodriguez-Clare (2012), and generalize...

This paper examines the role of imported inputs in cushioning exchange rate shocks by using a partial equilibrium model of heterogeneous firms. Producers in the model can serve the domestic market, export final goods, import inputs or engage in both exporting and importing. In the model, an...