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International Trade and Firms' Heterogeneity under Monopolistic Competition

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  • Sébastien Jean

Abstract

This article studies the interactions between international trade and firms' heterogeneity by proposing a tractable model consistent with the stylised facts. The model describes, in a general equilibrium framework, two economies producing and trading two goods, one homogeneous and the other differentiated. In the differentiated-good sector, firms are heterogeneous by their marginal cost, in a context of monopolistic competition with free-entry and exit. They incur a fixed production cost, but also a fixed cost if they choose to export. We show that trade in differentiated goods increases industry-wide efficiency, through two different logics: one defensive and import-driven; the other offensive and export-driven. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Sébastien Jean, 2002. "International Trade and Firms' Heterogeneity under Monopolistic Competition," Open Economies Review, Springer, vol. 13(3), pages 291-311, July.
    • Handle: RePEc:kap:openec:v:13:y:2002:i:3:p:291-311
    DOI: 10.1023/A:1015248022706
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    References listed on IDEAS

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    More about this item

    Keywords

    international trade; firms' heterogeneity; product differentiation; monopolistic competition; productive efficiency;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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