Diversity and Trade

Grossman, Gene M.; Maggi, Giovanni

doi:10.2139/ssrn.133071

Cited by 74 publications

(143 citation statements)

References 9 publications

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“…18 18 This may be reminiscent of Grossman and Maggi (2000), where trade between countries occurs because of differences in the distributions of workers’ talent. …”

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confidence: 99%

An Assignment Theory of Foreign Direct Investment

2008

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We develop an assignment theory to analyze the volume and composition of foreign direct investment (FDI). Firms conduct FDI by either engaging in greenfield investment or in cross-border acquisitions. Cross-border acquisitions involve firms trading heterogeneous corporate assets to exploit complementarities, while greenfield FDI involves building a new plant in the foreign market. In equilibrium, greenfield FDI and cross-border acquisitions co-exist within the same industry, but the composition of FDI between these modes varies with firm and country characteristics. Firms engaging in greenfield investment are systematically more efficient than those engaging in cross-border acquisitions. Furthermore, most FDI takes the form of cross-border acquisitions when production-cost differences between countries are small, while greenfield investment plays a more important role for FDI from high-cost into low-cost countries. These results capture important features of the data.JEL Codes: F12, F14, F23, L11.

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“…18 18 This may be reminiscent of Grossman and Maggi (2000), where trade between countries occurs because of differences in the distributions of workers’ talent. …”

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confidence: 99%

An Assignment Theory of Foreign Direct Investment

2008

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“…Dovetailing with this are theories proposing that different industries perform optimally under different degrees of skill diversity. Grossman and Maggi [] build a theoretical model explaining how differences in skill dispersion across countries could determine comparative advantage and global trade patterns. Building on this work, Morrow [] models multiple industries and general skill distributions, and finds that skill diversity explains productivity and export differences in developing countries.…”

Section: Introductionmentioning

confidence: 99%

Firm Productivity Differences From Factor Markets

Cheng

Morrow

2018

The J Industrial Economics

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We model firm adaptation to local factor markets in which firms care about both the price and availability of inputs. The model is estimated by combining firm and population census data, and quantifies the role of factor markets in input use, productivity and welfare. Considering China's diverse factor markets, we find that within an industry interquartile labor costs vary by 30-80%, leading to 3-12% interquartile differences in TFP. In general equilibrium, homogenization of labor markets would increase real income by 1.33%. Favorably endowed regions attract more economic activity, providing new insights into within-country comparative advantage and specialization. * We thank

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“…In the literature, Grossman and Maggi (2000) have studied the pattern and implications of international trade when workers have different talents. In their model, production requires that multiple tasks be performed.…”

Section: Introductionmentioning

confidence: 99%

Globalisation and the Size Distribution of Firms*

Zhou

2010

Economic Record

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The implications of globalisation on the size distribution of firms and returns to individuals are studied in a general equilibrium model in which individuals with different managerial skills choose to become managers or workers. The return to managerial skill as a convex function of managerial skill arises naturally when firms engage in oligopolistic competition. Globalisation affects a firm’s output and the price level. The change of the price level leads to the exit of less efficient firms and an increase of average firm size. Even though countries are identical and there is no fixed cost of production, globalisation can be beneficial to all countries. Impact of globalisation between countries with different endowments is also studied.

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Diversity and Trade

Cited by 74 publications

References 9 publications

An Assignment Theory of Foreign Direct Investment

An Assignment Theory of Foreign Direct Investment

Firm Productivity Differences From Factor Markets

Globalisation and the Size Distribution of Firms*

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