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The New Palgrave Dictionary of Economics pp 6849–6853Cite as

Palgrave Macmillan

International Trade and Heterogeneous Firms

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Abstract

Empirical studies of production units within sectors have reported a massive amount of heterogeneity in various performance measures (most notably, size and productivity). This heterogeneity, within sectors, matters for theoretical and empirical models of trade. Trade, or trade liberalization more generally, induces important reallocations between heterogeneous producers in a sector: the smallest, least productive producers are forced to exit, and market shares are further reallocated between less productive producers (who do not export) towards larger, more productive exporters. These reallocations generate a new channel for productivity and welfare gains from trade.

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  1. http://link.springer.com/referencework/10.1057/978-1-349-95189-5

    Marc J. Melitz

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  1. Marc J. Melitz
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Melitz, M.J. (2018). International Trade and Heterogeneous Firms. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2055

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