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Firm Heterogeneity and the Localization of Economic Activities

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  • Pamela Bombarda

    (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper examines how market-access strategies, via exports and FDI, respond to changes in the level of integration. Empirical evidence shows that both firm exports and multinational activity are affected by trade-liberalization episodes. We account for the strong positive correlation between exports and FDI by developing a general-equilibrium model featuring firm heterogeneity, trade and FDI with final and intermediate products. Different geographical spaces are considered to quantify the effect of a preferential trade agreement (PTA) on supply-mode decisions, for both partner and excluded countries. The model sheds new light on the mechanisms through which geography reshapes the concentration of economic activities both inside and outside the PTA area.

Suggested Citation

  • Pamela Bombarda, 2013. "Firm Heterogeneity and the Localization of Economic Activities," Working Papers hal-00877201, HAL.
    • Handle: RePEc:hal:wpaper:hal-00877201
    Note: View the original document on HAL open archive server: https://hal.science/hal-00877201
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    More about this item

    Keywords

    Heterogeneous firms; PTA; Spatial networks; Intra-firm trade;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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