This paper deploys a dynamic extension of the Melitz (2003) model to generate predictions on export market exit and firm survival in a setting where firms endogenously make exit decisions. The central driver of the model dynamics is the inclusion of exogenous economy wide technological progress....

We examine an export game where two firms (home and foreign), located in two differentcountries, produce vertically differentiated products. The foreign firm is the most efficientin terms of R&D costs of quality development and the foreign country is relatively larger andendowed with a...

In the 2X2X2 Heckscher-Ohlin model there exists a one to one relation between relative good prices and relative factor prices. A change in the relative price of one good changes the relative price of the factor used intensively in the production of the good in the same direction. We review this...

We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large inefficiencies associated with markups, and (ii) a weak pattern of cross-country...

Sino-European trade relations have been controversially discussed mainly, if not only, because of the increasing European Union's bilateral trade deficit with China. As from the European perspective trade with China becomes more important, the structural adjustment process of the Chinese economy...

This paper adopts the Hausman-Taylor 2SLS error components approach in estimating the determinants of China's Intra-Industry Trade (IIT) in the capital goods sector with its 26 partner countries. It disaggregates IIT into horizontal IIT (HIIT) and vertical IIT (VIIT). Capital goods final...

During the last decades, international trade flows especially of the industrialized countries allegedly became more and more intra-industry. At the same time, employment perspectives particularly of the low-skilled by tendency deteriorated in these countries. This phenomenon is often traced back...

Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This note shows, however, that this added realism also implies that there may exist a positive...

We propose occupational decisions of heterogeneous individuals as an alternative mechanism of explaining the distribution of firm productivities emphasized by empirical studies. Thus, we integrate the frameworks of Melitz (2003), and of Manasse and Turrini (2001) that establish the theoretical...

Starting with Krugman (1980), much literature has analyzed how trade liberalization affects the economy based on the notion that trade is motivated by consumer's love of variety. In this paper, I augment these preferences by the determinants of demand for heterogeneous products. The model...