Citation

Discussion Paper Details

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Title: Country Size, Productivity and Trade Share Convergence: An Analysis of Heterogenous Firms and Country Size Dependent Beachhead Costs

Author(s): Anders Akerman and Rikard Forslid

Publication Date: October 2007

Keyword(s): beachhead costs, heterogenous firms and market size

Programme Area(s): International Trade and Regional Economics

Abstract: This paper modifies the heterogenous firms and trade model by Melitz (2003) by explicitly modelling the entry cost of a firm in a new market as a function of market size. This leads to several new predictions compared to the standard model: The productivity of non exporters and exporters depends on market size. Moreover, manufacturing export shares vary inversely with country size. However, export shares converge (upwards) as markets are integrated. The empirical part of the paper offers support for our model specification.

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Bibliographic Reference

Akerman, A and Forslid, R. 2007. 'Country Size, Productivity and Trade Share Convergence: An Analysis of Heterogenous Firms and Country Size Dependent Beachhead Costs'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6545