We present a gravity model that accounts for multilateral resistance, firm heterogeneity and country-selectioninto trade, while accommodating asymmetries in trade flows. A new equation for the proportion of exporting…firms takes a gravity form: the extensive margin is also accected by...

We introduce search unemployment à la Pissarides into Melitz’ (2003) model of trade with heterogeneous firms. We allow wages to be individually or collectively bargained and analytically solve for the equilibrium. We find that the selection effect of trade influences labor market outcomes....

The interaction between trade liberalisation, product and process innovation, and relative skill demand is analysed in a model of international oligopoly. Lower trading barriers increase the degree of foreign competition. The competing enterprises respond by investing more aggressively in...

We consider the plant location decision of a multinational, which has the option to invest in a more or aless technologically advanced country. We find that in the absence of exporting by the local firms, themultinational will invest in the country lagging behind, unless the firms in that...

This paper provides a simple theory of geographical mobility which simultaneously explainspeople’s choice of residences in space and the location of industry. Residences are chosenon the basis of the utility which mobile households obtain across locations...

We construct a model of offshoring with externalities and firm heterogeneity. Due to thepresence of externalities, temporary shocks like the Y2K problem can have permanenteffects, i.e., they can permanently raise the extent of offshoring in an industry. Also, the initialadvantage of a country as...

We study the impact of transfer pricing rules on sales prices, firms’ organizational structure, andconsumers’ utility within a two-country monopolistic competition model featuring source-basedprofit taxes that differ across countries. Firms can either become multinationals, i.e., they serve...

Significant amount of vertical technology transfer occurs betweendeveloped and developing country firms, yet the literature on intellectual propertyrights did not pay much attention to this aspect...

We consider strategic government policies on the exports of final goods andon the input production when the inputs are non-tradable and produced by the foreignfirms. If the policies consist of only per-unit tax/subsidies either on the final goods oron the inputs, it is optimal for the...

This paper investigates the impacts of progressive trade openness, technological externalities,and heterogeneity of individuals on the formation of entrepreneurship in a two-countryoccupation choice model. We show that trade opening gives rise to a non-monotonic processof international...