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Efficiency in International Trade with Firm Heterogeneity and Networks

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  • Nguyen Hiep
  • Hiroshi Ohta

Abstract

This paper examines integrated effects of firm heterogeneity and communication network services on international trade. Patterns and effects of trade are analyzed in a general equilibrium model where firms with different productivity levels share among them the cost of network services and compete in a monopolistically competitive market for a differentiated good. The paper reveals that the more efficient country in the production of the differentiated good is not always the net exporter of the good. The less efficient country also has the chance to expand the industry and then to become the net exporter in this intra‐industry trade due to the combination of the efficiency effect induced by firm heterogeneity and the cost‐sharing effect by the existence of the network service industry.

Suggested Citation

  • Nguyen Hiep & Hiroshi Ohta, 2007. "Efficiency in International Trade with Firm Heterogeneity and Networks," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 217-231, May.
    • Handle: RePEc:bla:rdevec:v:11:y:2007:i:2:p:217-231
    DOI: 10.1111/j.1467-9361.2007.00410.x
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    References listed on IDEAS

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    1. Toru Kikuchi & Tetsuro Ichikawa, 2002. "Congestible communications networks and international trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(2), pages 331-340, May.
    2. Nguyen HIEP & Hiroshi OHTA, 2005. "Heterogeneity, Networks and International Trade under Monopolistic Competition," GSICS Working Paper Series 1, Graduate School of International Cooperation Studies, Kobe University.
    3. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(1), pages 31-66.
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    Cited by:

    1. Jürgen Meckl & Benjamin Weigert, 2013. "Special Issue. Guest Editor: Zhihao Yu," Review of Development Economics, Wiley Blackwell, vol. 17(3), pages 549-558, August.

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