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Heterogeneity, Networks and International Trade under Monopolistic Competition

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  • Nguyen HIEP
  • Hiroshi OHTA

Abstract

This paper examines integrated effects of firm heterogeneity and communication network services on international trade. Patterns and effects of trade are to be analyzed in a general equilibrium model where firms with different productivity levels share among them the cost of network services and compete in a monopolistically competitive market for a differentiated good. The paper reveals that the more efficient country in the differentiated good production is not always the net-exporter of the good. The less efficient country also has the chance to expand the industry and then to become the net-exporter in this intra-industry trade due to the combination of the efficiency effect induced by firm heterogeneity and the cost-sharing effect by the existence of the network service industry.

Suggested Citation

  • Nguyen HIEP & Hiroshi OHTA, 2005. "Heterogeneity, Networks and International Trade under Monopolistic Competition," GSICS Working Paper Series 1, Graduate School of International Cooperation Studies, Kobe University.
    • Handle: RePEc:kcs:wpaper:1
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    File URL: http://www.research.kobe-u.ac.jp/gsics-publication/gwps/2005-01.pdf
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    References listed on IDEAS

    as
    1. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    2. Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2005. "Assessing the impact of communication costs on international trade," Journal of International Economics, Elsevier, vol. 67(2), pages 428-445, December.
    3. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(1), pages 31-66.
    4. Toru Kikuchi, 2003. "Interconnectivity of communications networks and international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 155-167, February.
    5. Manasse, Paolo & Turrini, Alessandro, 2001. "Trade, wages, and 'superstars'," Journal of International Economics, Elsevier, vol. 54(1), pages 97-117, June.
    6. Toru Kikuchi & Tetsuro Ichikawa, 2002. "Congestible communications networks and international trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(2), pages 331-340, May.
    7. Catia Montagna, 2001. "Efficiency Gaps, Love of Variety and International Trade," Economica, London School of Economics and Political Science, vol. 68(269), pages 27-44, February.
    8. Toru Kikuchi & Chiharu Kobayashi, 2003. "Communications networks and virtual economic integration: The case of three countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(1), pages 1-6, February.
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    Cited by:

    1. Nguyen Hiep & Hiroshi Ohta, 2007. "Efficiency in International Trade with Firm Heterogeneity and Networks," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 217-231, May.

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