Working Paper: CEPR ID: DP13528
Authors: Rikard Forslid; Toshihiro Okubo
Abstract: In this paper we study how trade liberalization affects the location and the product scope of firms. We find that the largest and most productive multiproduct firms concentrate to the larger market as a result of trade liberalization. In the presence of relocation costs, we also find that these firms will expand their product range in the larger market while firms in the smaller market will contract their product scope. These effects are magnified with firm-level productivity. The findings are consistent with Japanese manufacturing firm data.
Keywords: multiproduct firms; heterogeneous firms; trade liberalization; firm location
JEL Codes: F12; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade liberalization (F13) | concentration of multiproduct firms in larger markets (L19) |
| relocation costs (J32) | concentration of multiproduct firms in larger markets (L19) |
| market size (L25) | product scope (L68) |
| productivity (O49) | product scope (L68) |