TY - JOUR
T1 - Comparative advantage and heterogeneous firms
AU - Bernard, Andrew B.
AU - Redding, Stephen J.
AU - Schott, Peter K.
N1 - Funding Information:
Acknowledgements. Bernard and Schott gratefully acknowledge research support from the National Science Foundation (SES-0241474). Redding gratefully acknowledges financial support from a Philip Leverhulme Prize. We would like to thank Pol Antras, Richard Baldwin, James Harrigan, Marc Melitz, Tony Venables, Zhihong Yu, seminar and conference participants at the NBER Spring Meetings, CEPR, ETSG, the IMF, Hitotsubashi, Princeton, Columbia, the New York Federal Reserve, and London School of Economics for helpful comments. The views expressed and any errors are the authors’ responsibility.
PY - 2007/1
Y1 - 2007/1
N2 - This paper examines how country, industry, and firm characteristics interact in general equilibrium to determine nations'responses to trade liberalization. When firms possess heterogeneous productivity, countries differ in relative factor abundance, and industries vary in factor intensity, falling trade costs induce reallocations of resources both within and across industries and countries. These reallocations generate substantial job turnover in all sectors, spur relatively more creative destruction in comparative advantage industries than in comparative disadvantage industries, and magnify ex ante comparative advantage to create additional welfare gains from trade. The improvements in aggregate productivity as countries liberalize dampen and can even reverse the real-wage losses of scarce factors.
AB - This paper examines how country, industry, and firm characteristics interact in general equilibrium to determine nations'responses to trade liberalization. When firms possess heterogeneous productivity, countries differ in relative factor abundance, and industries vary in factor intensity, falling trade costs induce reallocations of resources both within and across industries and countries. These reallocations generate substantial job turnover in all sectors, spur relatively more creative destruction in comparative advantage industries than in comparative disadvantage industries, and magnify ex ante comparative advantage to create additional welfare gains from trade. The improvements in aggregate productivity as countries liberalize dampen and can even reverse the real-wage losses of scarce factors.
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U2 - 10.1111/j.1467-937X.2007.00413.x
DO - 10.1111/j.1467-937X.2007.00413.x
M3 - Article
AN - SCOPUS:33846023337
SN - 0034-6527
VL - 74
SP - 31
EP - 66
JO - Review of Economic Studies
JF - Review of Economic Studies
IS - 1
ER -