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Multiproduct firms and product scope adjustment in trade

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  • Lopresti, John

Abstract

A recent theoretical literature has emphasized the importance of multiproduct firms in trade. However, models within this literature have reached contradictory conclusions regarding the product-level response of firms to changes in trade costs. This paper attempts to resolve these contradictions by employing Bayesian techniques to estimate the product portfolio response throughout the distribution of US firms following the Canada–US Free Trade Agreement of 1989. I find evidence of a differential response among firms that are heterogeneous in terms of their involvement in foreign markets. Firms with less than 10–20% of total sales accounted for by foreign markets reduced product diversification as trade costs fell, while more foreign-oriented firms increased diversification.

Suggested Citation

  • Lopresti, John, 2016. "Multiproduct firms and product scope adjustment in trade," Journal of International Economics, Elsevier, vol. 100(C), pages 160-173.
    • Handle: RePEc:eee:inecon:v:100:y:2016:i:c:p:160-173
    DOI: 10.1016/j.jinteco.2016.03.002
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    Cited by:

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    3. Lisandra Flach & Michael Irlacher, 2018. "Product versus Process: Innovation Strategies of Multiproduct Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 236-277, February.
    4. Thanh Doan, Ha Thi, 2019. "Multi-product Firms, Tariff Liberalization, and Product Churning in Vietnamese Manufacturing," ADBI Working Papers 918, Asian Development Bank Institute.
    5. Meng, Ning & Milner, Chris & Song, Huasheng, 2020. "Antidumping and heterogeneous quality adjustment of multi-product firms: Evidence from Chinese exporters," Economic Modelling, Elsevier, vol. 92(C), pages 147-161.
    6. Benjamin Gampfer & Ingo Geishecker, 2019. "Chinese competition: intra-industry and intra-firm adaptation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(2), pages 327-352, May.
    7. Miao, Zhuang & Li, Yifan, 2017. "Trade Scopes across Destinations: Evidence from Chinese Firm," MPRA Paper 80863, University Library of Munich, Germany, revised 15 Aug 2017.
    8. Ngo Van Long & Yifan Li & Zhuang Miao, 2020. "Effects of Exchange Rate Volatility on Export Diversity: The Role of Production Constraints," CIRANO Working Papers 2020s-41, CIRANO.
    9. Zhaobin Fan & Ruimin Bian & Hui Li, 2024. "The Impact of High‐standard Free Trade Areas on the Diversification of China's Export Products: Expanding Market or Intensifying Competition?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 32(4), pages 33-67, July.
    10. repec:hal:spmain:info:hdl:2441/1f59r6ssre9eiqb2rso9ui50m2 is not listed on IDEAS
    11. Chakraborty, Pavel & Henry, Michael, 2019. "Chinese competition and product variety of Indian firms," Journal of Comparative Economics, Elsevier, vol. 47(2), pages 367-395.
    12. Michael Irlacher, 2022. "Multi-product Firms in International Economics," Economics working papers 2022-01, Department of Economics, Johannes Kepler University Linz, Austria.
    13. Macedoni, Luca, 2022. "Large multiproduct exporters across rich and poor countries: Theory and evidence," Journal of Development Economics, Elsevier, vol. 156(C).
    14. Luca Macedoni & Rui Zhang & Frederic Warzynski, 2024. "Fight or Flight? How Do Firms Adapt Their Product Mix in Response to Demand and Competition," CESifo Working Paper Series 11144, CESifo.
    15. Bai, Zhuoran & Meng, Shuang & Miao, Zhuang & Zhang, Yan, 2019. "Services Liberalization and Export Diversity: Theory and Evidence from Chinese Firms," MPRA Paper 95862, University Library of Munich, Germany.
    16. Bacchetta, Marc & Helble, Matthias (ed.), 2020. "Trade Adjustment in Asia: Past Experiences and Lessons Learned," ADBI Books, Asian Development Bank Institute, number 12, Décembre.
    17. Xiong, Tingting, 2022. "The Effect of Bilateral Investment Treaties (BITs) on the extensive and intensive margins of exports," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 68-79.
    18. HUR, Jung & YOON, Haeyeon, 2018. "Product Dynamics and Trade Liberalization: Evidence from the Korea-US FTA," Discussion paper series HIAS-E-82, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    19. Zhuoran Bai & Shuang Meng & Zhuang Miao & Yan Zhang, 2023. "Liberalization for services foreign direct investment and product mix adjustment: Evidence from Chinese exporting firms," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 363-388, May.
    20. Weihao Zhang & Helian Xu & Yuanyuan Xu, 2023. "Does Stronger Environmental Regulation Promote Firms’ Export Sophistication? A Quasi-Natural Experiment Based on Sewage Charges Standard Reform in China," Sustainability, MDPI, vol. 15(11), pages 1-17, June.
    21. Kim, Kyungmin, 2018. "Multiproduct competition in a North-South model with technological differences," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 262-273.
    22. repec:spo:wpmain:info:hdl:2441/1f59r6ssre9eiqb2rso9ui50m2 is not listed on IDEAS
    23. Xinghua Deng & Ran Jing & Zheng Liang, 2020. "Trade liberalisation and domestic brands: Evidence from China's accession to the WTO," The World Economy, Wiley Blackwell, vol. 43(8), pages 2237-2262, August.

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    More about this item

    Keywords

    Multiproduct firms; CUSFTA; Product scope adjustment; Bayesian;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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