Economies of scale and the volume of intra-industry trade

Schmitt, Nicolas; Yu, Zhihao

doi:10.1016/s0165-1765(01)00519-5

“…This new type of specifications, where firms are heterogeneous with respect to their cost structures, has generated important new insights, frequently reconciling theory with the stylized facts of international trade, e.g. Schmitt and Yu (2001), Melitz (2003), Helpman, Melitz and Yeaple (2004) or Yeaple (2005), but has not yet been used to systematically examine trade policies.…”

Section: Resultsmentioning

confidence: 99%

“…Schmitt and Yu (2001), Melitz (2003), Helpman, Melitz and Yeaple (2004) or Yeaple (2005). These specifications, where firms are heterogeneous with respect to their cost structures, have provided important new insights, frequently reconciling theory with the stylized facts of international trade.…”

Section: Introductionmentioning

confidence: 99%

“…These specifications, where firms are heterogeneous with respect to their cost structures, have provided important new insights, frequently reconciling theory with the stylized facts of international trade. For example Schmitt and Yu (2001) resolve the puzzle of scale economies and the volume of intra-industry trade by introducing firm-level heterogeneous fixed exporting costs. Melitz (2003) features firm-level heterogeneous marginal costs and analyzes intra-industry reallocations, showing that additional gains from trade stem from the induced productivity improvements.…”

Section: Introductionmentioning

confidence: 99%

“…In this paper, we examine this issue in a simple symmetric two-county Krugman-type (1980) intra-industry trade model, while introducing firm-level heterogeneous fixed costs of exporting as in Schmitt and Yu (2001) 2 and a bilateral ad valorem tariff. The present model assumes that all tariff revenues and firm profits are redistributed in a lump sum fashion to consumers, that there are no wasteful (e.g.…”

mentioning

confidence: 99%

See 2 more Smart Citations

Tariffs and Firm-Level Heterogeneous Fixed Export Costs

Jørgensen

¹

,

Schröder

²

2006

The B.E. Journal of Economic Analysis &Amp; Policy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in May 2005Abstract Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This note shows, however, that this added realism also implies that there may exist a positive bilateral tariff that maximizes national and world welfare. Applying one of the simplest specifications possible, namely a symmetric two-country intra-industry trade model with fixed export costs that are heterogeneous across firms, we find that the reciprocal reduction of small tariffs reduces welfare. JEL: F12, F13, F15

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“…2 Schmitt and Yu (2001) provide a theoretical explanation for this result in a monopolistic competition model with traded and non-traded goods. Therefore, when looking at the effect of product differentiation on intra-industry trade, it seems prudent to analyse the effect on the volume of intra-industry trade rather than the effect on the Grubel-Lloyd index.…”

Section: Introductionmentioning

confidence: 91%

Product Differentiation, the Volume of Trade and Profits under Cournot and Bertrand Duopoly

Collie

¹

,

Le

²

2014

International Journal of the Economics of Business

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in CARDIFF BUSINESS SCHOOL WORKING PAPER SERIESThis working paper is produced for discussion purpose only. These working papers are expected to be published in due course, in revised form, and should not be quoted or cited without the author's written permission. AbstractThis paper analyses how product differentiation affects the volume of trade under duopoly using Shubik-Levitan demand functions rather than the Bowley demand functions used by Bernhofen (2001). The Shubik-Levitan demand functions have the advantage that an increase in product differentiation does not increase the size of the market as happens with the Bowley demand functions. It is shown that the volume of trade in terms of quantities is decreasing in the degree of product differentiation when the trade cost is relatively low, but increasing in the degree of product differentiation when the trade cost is relatively high.Keywords: Product Differentiation, Cournot Oligopoly, Bertrand Oligopoly.JEL Classification: F12, F13.* We thank Daniel Bernhofen and Roger Clarke for providing comments and suggestions on an earlier draft of this paper that have greatly improved the presentation. We are responsible for any remaining errors.

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