In this paper we study how the trade costs and the intensity of competition can explain the existence of bilateral trade, unilateral trade and no trade within an industry. We show as trade costs decrease from very high to very low values, the global economy moves from autarky to a regime of...

The aim of this paper is to study the spatial selection of firms once it is recognized that heterogeneous firms typically choose different locations in respond to market integration of regions having different sizes. Specifically, we show that decreasing trade costs leads to the gradual...