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Trading away wide brands for cheap brands

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  • Dhingra, Swati

Abstract

Firms face competing needs to expand product variety and reduce production costs. Trade policy affects firm investments in product variety and production processes differently. Access to larger markets enables innovation to reduce costs. Although firm scale increases, foreign competition reduces markups. Firms react by narrowing their product varieties to recapture these lost markups. I provide a theory detailing this conflicting impact of trade policy and address welfare gains from trade. Accounting for firm heterogeneity, I show support for the theoretical predictions with firm-level innovation data from Thailand’s manufacturing sector which experienced unilateral home tariff changes during 2003-2006.

Suggested Citation

  • Dhingra, Swati, 2011. "Trading away wide brands for cheap brands," LSE Research Online Documents on Economics 121770, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121770
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    File URL: http://eprints.lse.ac.uk/121770/
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    References listed on IDEAS

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    1. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
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    More about this item

    Keywords

    brands; trade; manufacturing; heterogeneous firms; Thailand;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • N80 - Economic History - - Micro-Business History - - - General, International, or Comparative

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