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A model of firm heterogeneity in factor intensities and international trade

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  • Julian Emami Namini
  • Giovanni Facchini
  • Ricardo A. López

Abstract

Empirical evidence suggests that exporters are, in addition to being more productive, significantly more skilled-labour intensive than non-exporters. In a setting that captures both these features, we show that the firm selection induced by trade liberalization works along two dimensions. First, export growth increases competition for skilled labour. This leads to the exit of some of the skilled-labour intensive firms, while benefitting unskilled-labour intensive ones. Second, within the group of firms with the same factor intensities, the reallocation of factors is towards the exporters. We show that the increased competition for skilled labour dampens the positive effect of trade liberalization on sector-wide TFP and real income.

Suggested Citation

  • Julian Emami Namini & Giovanni Facchini & Ricardo A. López, 2015. "A model of firm heterogeneity in factor intensities and international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 48(4), pages 1456-1480, November.
    • Handle: RePEc:cje:issued:v:48:y:2015:i:4:p:1456-1480
    DOI: 10.1111/caje.12150
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    Cited by:

    1. Carlo Perroni & Davide Suverato, 2023. "Skills scarcity and export intensity," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(2), pages 719-757, May.
    2. Andrea Ariu & Tobias Müller & Tuan Nguyen, 2023. "Immigration and the Slope of the Labor Demand Curve: The Role of Firm Heterogeneity in a Model of Regional Labor Markets," CESifo Working Paper Series 10344, CESifo.

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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