The spatial selection of heterogeneous firms

We show that heterogeneous firms choose different locations in response to market integration. Specifically, decreasing trade costs lead to the gradual agglomeration of efficient firms in the larger country where they have access to a bigger pool of consumers. In contrast, high-cost firms seek protection against competition from efficient firms by locating in the smaller country. However, when the spatial separation of markets ceases to be a sufficient protection against foreign competition, high-cost firms choose to set up in the larger market. Hence, the relationship between economic integration and international productivity gap first increases and then decreases with market integration.     

Transportation, freight rates, and economic geography

We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping manufactured goods, and freight rates are set to clear transport markets. Each carrier must commit to the maximum capacity for a round-trip and thus faces a logistics problem as there are opportunity costs of returning empty. These costs increase the freight rates charged to firms located in regions that are net exporters of manufactured goods. Since demand for transport services depends on the spatial distribution of economic activity, the concentration of production in one region raises freight rates to serve foreign markets from there, thus working against specialization and the agglomeration of firms. Consequently, a more even spatial distribution of firms and production prevails at equilibrium when freight rates are endogenously determined than when they are assumed to be exogenous as in the literature.     

Market size and tax competition

With international externalities, different country sizes, imperfect competition, and trade costs, tax competition for mobile firms is efficiency-enhancing with respect to the free market outcome. Under both scenarios, the resulting inefficiencies in international specialization and trade flows vanish when trade costs are low enough. Otherwise, only international tax coordination can implement the efficient spatial distribution of firms.     

Monopsony distortions in an open economy: A theoretical analysis

This paper examines the positive and welfare implications of monopsony distortions in a small open economy. The equilibrium when one industry exercises its monopsony power is characterized by an endogenous differential between the marginal rates of substitution in production between the two industries. This monopsony distortion leads to various pathological positive results, including non-tangency of the commodity price-ratio with the shrunk-in distorted PPC, output responses unrelated to the convexity or concavity of the distorted PPC, reverse Stolper-Samuelson results, and opposite movements in real wages and real incomes. In addition, the welfare effect of trade liberalization is of ambiguous sign.     

Innovation and trade with heterogeneous firms

This paper examines how trade liberalization affects the innovation incentives of firms, and what this implies for industry productivity. For this purpose we develop a reciprocal dumping model of international trade with heterogeneous firms and endogenous R&D. Among the robust results that hold both in the short run when there is no entry, and in the long run under free entry are that trade liberalization increases aggregate R&D when trade costs are low and decreases R&D when trade costs are high. Expected industry productivity rises as trade costs fall.     

Power laws in firm size and openness to trade: Measurement and implications

Existing estimates of power laws in firm size typically ignore the impact of international trade. Using a simple theoretical framework, we show that international trade systematically affects the distribution of firm size: the power law exponent among exporting firms should be strictly lower in absolute value than the power law exponent among non-exporting firms. We use a dataset of French firms to demonstrate that this prediction is strongly supported by the data, both for the economy as a whole and at the industry level. Furthermore, the differences between power law coefficients for exporters and non-exporters are larger in sectors that are more open to trade. While estimates of power law exponents have been used to pin down parameters in theoretical and quantitative models, our analysis implies that the existing estimates are systematically lower than the true values. We propose two simple ways of estimating power law parameters that take explicit account of exporting behavior.     

Innovation and employment growth in industrial clusters: evidence from aeronautical firms in Germany

This article investigates the impact of various agglomeration forces on employment and innovation for a sample of aeronautical cluster firms in Northern Germany and a control group of geographically dispersed aeronautical firms in other German regions. The findings suggest that employment growth is positively affected by labor market pooling but this effect is not cluster‐specific. The firms' probability of innovating is positively influenced by knowledge flows from proximate scientific institutions and public information sources as well as demanding local customers. However, only the effect of demanding customers is cluster‐specific.     

零售商垄断势力、通道费与经济规制

拥有买方垄断势力的零售商对生产商的纵向约束是近年来西方国家反垄断司法实践所关注的焦点之一,然而现有的文献对于零售商拥有买方垄断势力的情形很少涉及.现实中,随着零售业的变革,下游零售商很可能在产业链中成为主导企业,从而导致零售商要求生产商交纳"通道费"的现象十分普遍.本文基于SCP分析框架,对零售商垄断势力下的通道费及其福利效应进行分析,并对相应的政府规制提出建议.     

Market potential, increasing returns and geographic concentration

In this paper, I examine the spatial correlation between wages and consumer purchasing power across U.S. counties to see whether regional demand linkages contribute to spatial agglomeration. First, I estimate a simple market-potential function, in which wages are associated with proximity to consumer markets. Second, I estimate an augmented market-potential function derived from the Krugman model of economic geography, parameter estimates for which reflect the importance of scale economies and transport costs. The estimation results suggest that demand linkages between regions are strong and growing over time, but quite limited in geographic scope.     

Exclusive dealing and common agency in international markets

This paper investigates the contractual choice between exclusive dealing and common agency in a simple international oligopoly model where products are sold through intermediaries. We find that when trade barriers are high, domestic firms tend to adopt exclusive dealing contracts whereas trade liberalization may lead firms to choose common agency. Social welfare can be raised be prohibiting exclusive dealing (common agency) when trade barriers are high (low) and products are close substitutes.     

Trade with Endogenous Market Power Under Asymmetric and Incomplete Information

This paper addresses whether or not trade under both asymmetric information and endogenous market power fits standard assumptions and outcomes of mechanism design of imperfect competition. I analyse the outcomes of a bilateral trade in which a manufacturer (the principal) purchases n inputs from a seller (the agent). Each input has a continuum of types, but the principal has no information on these input types, excepting their distributions. The model allows input types to shift input supply curves and flexibly accounts for any endogenous monopsony power (i.e., determined by the mechanism). Focusing on an optimal Bayesian mechanism, I find that the monotonicity assumption may not be enough to ensure price discrimination based on type. Truthful implementation implies that when allocation is increasing and weakly convex (curvature zero or positive) in the input type, the principal’s monopsony power decreases as the input type increases (i.e., is higher near competitive price for higher input type). However, under increasing but concave allocation, ambiguity remains as it is no longer guaranteed that high types would receive high prices. I also examine some extensions of the analysis in the cases of a benevolent principal and a mechanism with multiple agents. The findings provide explanation to real-world situations where input attribute affects market power of either player and to the functioning of many markets of goods and services under asymmetric and incomplete information.     

The trade-creating effects of business and social networks: evidence from France

Using theory-grounded estimations of trade flow equations, this paper investigates the role that business and social networks play in shaping trade between French regions. The bilateral intensity of networks is quantified using the financial structure and location of French firms and bilateral stocks of migrants. Compared to a situation without networks, migrants are shown to double bilateral trade flows, while networks of firms multiply trade flows by as much as four in some specifications. Finally, taking network effects into account divides the estimation of the impact of transport costs and of the effect of administrative borders by around three.     

The spatial selection of heterogeneous firms

We show that heterogeneous firms choose different locations in response to market integration. Specifically, decreasing trade costs lead to the gradual agglomeration of efficient firms in the larger country where they have access to a bigger pool of consumers. In contrast, high-cost firms seek protection against competition from efficient firms by locating in the smaller country. However, when the spatial separation of markets ceases to be a sufficient protection against foreign competition, high-cost firms choose to set up in the larger market. Hence, the relationship between economic integration and international productivity gap first increases and then decreases with market integration.     

Structural estimation and solution of international trade models with heterogeneous firms

We present an empirical implementation of a general-equilibrium model of international trade with heterogeneous manufacturing firms. The theory underlying our model is consistent with Melitz (2003). A nonlinear structural estimation procedure identifies a set of core parameters and unobserved firm-level trade frictions that best fit the geographic pattern of trade. Our estimation model is consistent with the specified general equilibrium model, and we conduct general equilibrium counterfactual analyses to illustrate model responses. We first assess the economic effects of reductions in measured tariffs. Taking the simple-average welfare change across regions the Melitz structure indicates welfare gains from liberalization that are four times larger than in a standard trade policy simulation. Furthermore, when we compare the economic impact of tariff reductions with reductions in estimated fixed trade costs we find that policy measures affecting the fixed costs are of greater importance than tariff barriers.     

Exporting raises productivity in sub-Saharan African manufacturing firms

Proponents of trade liberalization argue that exporting helps firms to achieve higher productivity levels. This hypothesis is examined for a panel of manufacturing firms in nine African countries. The results indicate that exporters in these countries are more productive and, more importantly, exporters increase their productivity advantage after entry into the export market. While the first finding can be explained by selection-only the most productive firms engage in exporting-the latter cannot. The results are robust when unobserved productivity differences and self-selection into the export market are controlled for using different econometric methods. Scale economies are shown to be an important channel for the productivity advance. Credit constraints and contract enforcement problems prevent firms that only produce for the domestic market from fully exploiting scale economies.     

Internationalisation, industrial policy and clusters

This paper analyses industrial policy in an open economy hosting an agglomeration consisting of vertically linked upstream and downstream firms. We show that optimal policy towards upstream and downstream industries may typically differ radically in this setting as compared to the case of a closed economy. Internationalisation in terms of international mobility of firms as well as reduced trade costs is found to have significant impact on policy design. We find that in addition to technology and demand characteristics, degree of mobility and level of trade cost are key determinants of tax and subsidy levels.     

Transportation,freight rates,and economic geography

We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping manufactured goods, and freight rates are set to clear transport markets. Each carrier must commit to the maximum capacity for a round-trip and thus faces a logistics problem as there are opportunity costs of returning empty. These costs increase the freight rates charged to firms located in regions that are net exporters of manufactured goods. Since demand for transport services depends on the spatial distribution of economic activity, the concentration of production in one region raises freight rates to serve foreign markets from there, thus working against specialization and the agglomeration of firms. Consequently, a more even spatial distribution of firms and production prevails at equilibrium when freight rates are endogenously determined than when they are assumed to be exogenous as in the literature.     

Trade policy: Home market effect versus terms-of-trade externality

We study trade policy in a two-sector Krugman (1980) trade model, allowing for wage, import and export subsidies/taxes. We study non-cooperative trade policies, first for each individual instrument and then for the situation where all instruments can be set simultaneously, and contrast those with the efficient allocation. We show that in this general context there are four motives for non-cooperative trade policies: the correction of monopolistic distortions; the terms-of-trade manipulation; the delocation motive for protection (home market effect); the fiscal-burden-shifting motive. The Nash equilibrium when all instruments are available is characterized by first-best-level wage subsidies, and inefficient import subsidies and export taxes, which aim at relocating firms to the other economy and improving terms of trade. Thus, the dominating incentives for non-cooperative trade policies are the fiscal-burden-shifting motives and terms-of-trade effects.     

Trade patterns and export pricing under non-CES preferences

We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firms' profits and sizes may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, although both firm sizes and profits are lower in this country than in the country where capital is relatively scarce. The pricing policy adopted by firms depends neither on capital endowment nor country asymmetry. It is determined by the nature of preferences: when demand elasticity increases (decreases) with consumption, firms practice dumping (reverse-dumping).