Comparative advantage and heterogeneous firms by Andrew B. Bernard

Cover of: Comparative advantage and heterogeneous firms | Andrew B. Bernard

Published by National Bureau of Economic Research in Cambridge, Mass .

Written in English

Read online

Subjects:

  • Diversification in industry,
  • International trade -- Mathematical models

Edition Notes

Book details

StatementAndrew B. Bernard, Stephen Redding, Peter K. Schott.
SeriesNBER working paper series -- no. 10668., Working paper series (National Bureau of Economic Research) -- working paper no. 10668.
ContributionsRedding, Stephen., Schott, Peter K., National Bureau of Economic Research.
The Physical Object
Pagination53, [4] p. :
Number of Pages53
ID Numbers
Open LibraryOL17623196M
OCLC/WorldCa56516005

Download Comparative advantage and heterogeneous firms

Comparative Advantage and Heterogeneous Firms ANDREW B. BERNARD Tuck School of Business at Dartmouth and NBER STEPHEN J. REDDING London School of Economics and CEPR and PETER K. SCHOTT Yale School of Management and NBER First version received December ; final version accepted February (Eds.).

Request PDF | Comparative Advantage and Heterogeneous Firms | This paper examines how country, industry, and firm characteristics interact in general equilibrium to determine nations' responses to.

Comparative advantage and heterogeneous firms. Cambridge, Mass.: National Bureau of Economic Research, © (OCoLC) Material Type: Internet resource: Comparative advantage and heterogeneous firms book Type: Book, Internet Resource: All Authors / Contributors: Andrew B Bernard; Stephen Redding; Peter K Schott; National Bureau of Economic Research.

Comparative Advantage And Heterogeneous Firms Article in Review of Economic Studies 74(1) February with 94 Reads How we measure 'reads'. Get this from a library. Comparative advantage and heterogeneous firms. [Andrew B Bernard; Stephen Redding; Peter K Schott; National Bureau of Economic Research.] -- "This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety.

The paper demonstrates that. "Comparative advantage and heterogeneous firms," LSE Research Online Documents on EconomicsLondon School of Economics and Political Science, LSE Library.

Andrew B. Bernard & Stephen Redding & Peter K. Schott, "Comparative advantage and heterogeneous firms," IFS Working Papers W04/24, Institute for Fiscal Studies. Comparative Advantage and Heterogeneous Firms Andrew B.

Bernard, Stephen Redding, Peter K. Schott. NBER Working Paper No. Issued in August NBER Program(s):International Trade and Investment This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety.

The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e.

at a lower relative marginal cost. bedding heterogeneous firms in a model of comparative advantage and analysing how firm, coun-try, and industry characteristics interact as trade costs fall. We report a number of new and often surprising results.

In contrast to the neoclassical model, we find that simultaneous within- and. Downloadable. This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety.

The paper demonstrates that firm reactions to trade liberalization generate endogenous Ricardian productivity responses at the industry level that magnify countries’ comparative advantage. Comparative Advantage and Heterogeneous Firms 4 first relates to consumers’ taste for variety.

Trade liberalization, as in Helpman and Krug-man (), makes foreign varieties available to consumers. This increase in product variety reduces consumer price indices and raises real income. In our framework, however, there is. Comparative Advantage and Heterogeneous Firms 2 1. Introduction This paper adds firm heterogeneity to a model of international trade that features both relative endowment differences across countries and consumer taste for variety.

The re-sulting model outlines the role that country and industry characteristics play in mediating. – Extend to a framework with heterogeneous firms As in Melitzwe model firms as heterogeneous in productivity – Introduce cross-country differences in factor abundance and crossand cross-industry differences in factor intensityindustry differences in factor intensity (comparative advantage) 6.

Comparative advantage is a key concept in the theory of global or international trade. James Mill was said to have originated the comparative advantage analysis but it was developed by his mentee David Ricardo.

The comparative advantage concept holds that all actors can mutually benefit from a trade when there is cooperation.

Opportunity cost. This paper incorporates Melitz’s Econometrica (–, ) heterogeneous-firm trade model in the Ricardian model of comparative advantage with a continuum of sectors introduced by Dornbusch et al.

(Am Econ Rev 67(5), –, ). In particular, we characterise the equilibrium outcomes when neither sectors nor countries are symmetric.

This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety. The paper demonstrates that firm reactions to trade liberalization generate endogenous Ricardian productivity responses at the industry level that magnify countries' comparative advantage.

Focusing on the wide Cited by: Theories of Heterogeneous Firms and Trade Stephen J. Redding Princeton University and CEPR 1 August, amine the implications of firm heterogeneity for comparative advantage, market size, aggregate trade, the welfare gains from trade, and the relationship between trade and income distribution.

While a number of. comparative advantage index. Basic predictions on extensive margins are the following: probability to be an exporter is higher when tariffs decrease (standard heterogeneous firm literature result), higher for firms in comparative advantage sectors (comparative advantage Heckscher-Ohlin kind-of result) and.

An Economics by Topic detail Comparative Advantage Introduction A person has a comparative advantage at producing something if he can produce it at lower cost than anyone else.

Having a comparative advantage is not the same as being the best at something. In fact, someone can be completely unskilled at doing something, yet still have [ ]. The book analyzes the evolution of the concept of comparative advantage from the eighteenth century to the present day. It examines the origins of the concept of comparative advantage, its current status within economic thought and its validity in today's global s: 1.

Chapter 2 The Ricardian Theory of Comparative Advantage. This chapter presents the first formal model of international trade: the Ricardian model. It is one of the simplest models, and still, by introducing the principle of comparative advantage, it offers some of the most compelling reasons supporting international trade.

Bernard, S. Redding, et al. "Comparative Advantage and Heterogeneous Firms." (PDF) Review of Economic Stud no. 1 (): 31– ———. "Multi-product Firms and Trade Liberalization." The Quarterly Journal of Economicsno.

3 (): – between comparative advantage and heterogeneous firms (Bernard et al. b), variable markups and market size (Melitz & Ottaviano ), country asymmetries (Arkolakis et al. ), multiproduct firms (Bernard et al. Eckel & NearyMayer et al. Comparative advantage is an economic law referring to the ability of any given economic actor to produce goods and services at a lower opportunity cost than other economic actors.

The law of. The Theory of Comparative Advantage - Overview. employed in a way in which we have some advantage. " (Book IV, Section ii, 12) Profit-seeking firms in each country's comparative advantage industry would recognize that the price of their good is higher in the other country.

Since transportation costs are zero, more profit can be made. Theories of Heterogeneous Firms and Trade Stephen J. Redding. NBER Working Paper No. Issued in December NBER Program(s):International Trade and Investment This paper reviews the recent theoretical literature on heterogeneous firms and trade, which emphasizes firm selection into international markets and reallocations of resources across firms.

Handbook of International Economics. Explore handbook content Latest volume All volumes. Latest volumes. Volume 4. Heterogeneous Firms and Trade. Marc J. Melitz, Stephen J. Redding. Domestic Institutions as a Source of Comparative Advantage. Nathan Nunn, Daniel Trefler.

You have likley already seen “Comparative Advantage and Heterogeneous Firms,” as Andrew Bernard, Stephen Redding, and Peter Schott worked on it for more than four you haven’t, now is the time. The paper was finally published early this year in the Review of Economic Studies (journal pdf; older ungated pdf).It’s a fabulous piece of theory that introduces heterogeneous firms.

(standard heterogeneous firm literature result), higher for firms in comparative advantage sectors (comparative advantage Heckscher-Ohlin kind-of result) and moves differently for comparative advantage and disadvantage sectors as tariffs change. This last finding is new in literature and somehow puzzling.

Keywords: Ricardian comparative advantage, Country size, Technology, Heterogeneous firms JEL classification Numbers: F12, F14 RIETI Discussion Papers Series aims at widely disseminating research results in the form of professional papers, thereby stimulating lively discussion.

The views expressed in the papers are solely. Virtual Trade and Comparative Advantage - ISBN: - (ebook) - von Sugata Marjit, Biswajit Mandal, Noritsugu Nakanishi, Verlag: Springer. • It seems that new firms need to start production in order to know their productivity level.

(In many countries both the exit rate and the growth rate of younger firms are higher than those of older firms.) • If we can assume this, the entry and exit rates will be higher in industries with a comparative advantage even a in steady state.

She documents that this domestic/export market “reversal” occurs for Chinese firms in sectors where China enjoys a strong comparative advantage relative to its trading partners. Burstein and Vogel, unpublished a, Harrigan and Reshef, explore complementarities between heterogeneous firm productivity and skill intensity, and how this.

The revolution in firm-level approaches to trade has significant implications for how political economists approach trade-policy preferences and the demand for policy outcomes. Rather than focusing on factor mobility to explain political cleavages, firm-based political economy models emphasize the role of firm-level heterogeneity in predicting trade’s winners and losers.

The resource-based view (RBV) is a managerial framework used to determine the strategic resources a firm can exploit to achieve sustainable competitive advantage. Barney's article "Firm Resources and Sustained Competitive Advantage" is widely cited as a pivotal work in the emergence of the resource-based view.

However, some scholars argue that there was evidence for a fragmentary. Comparative advantage rst articulated by David Ricardo inhas been the corner stone of The model features heterogeneous rm and variable mark-up as in Melitz and Ottaviano ().

Firms possess a "core competency" and has access to a multi-product technology. Marginal cost increases as the product moves away from the core competency. Comparative Advantage Versus Absolute Advantage Absolute advantage is anything a country does more efficiently than other countries.

Nations that are blessed with an abundance of farmland, fresh water, and oil reserves have an absolute advantage in. advantage, which, before Porter (), had been strictly applied at the firm level, comparative advantage can be broadly applied at multiple levels of analysis (Ricardo, ).

As noted by Paul Samuelson (), the Nobel laureate in economics, “comparative advantage is the only proposition in the whole of social science to be both. with the heterogeneous –rm model of Melitz (). Their main –nding is that the within in-dustry reallocation induced by trade liberalization is more pronounced in comparative advantage industry, which magni–es ex ante comparative advantage.

Our model is closely related to their work. The authors develop a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to study wage inequality during the adjustment after trade liberalization and potential policy responses to reduce wage inequality.

Comparative advantage always determines the direction of trade, but both competitive and absolute advantage affect resource allocation, trade patterns and trade volumes. Competitive advantage in the sense of more home firms drives foreign firms out of marginal sectors but also makes some marginal home sectors uncompetitive.Historical Overview.

The theory of comparative advantage A country has a comparative advantage when it can produce a good at a lower opportunity cost than another country; alternatively, when the relative productivities between goods compared with another country are the highest.

is perhaps the most important concept in international trade theory. It is also one of the most commonly.Comparative Advantage, Firm Heterogeneity, and That is, the effect of comparative advantage on the number of firms (or the extensive margin) can be magnified through exporter selection.5 This study adds to the literature in two ways.

First, this paper is the first to empirically.

90722 views Wednesday, December 2, 2020