Working Paper: CEPR ID: DP9037
Authors: Volker Nocke; Stephen R. Yeaple
Abstract: We present an international trade model of multiproduct firms where firms differ in their endowment of managerial resources and in how effectively these resources can be used in making production more efficient. The model gives rise to a trade-off between conglomerate and specialization strategies of firms, yielding testable predictions on the relationship between firm size, scope and productivity. More efficient firms become exporters, but not all exporters are large and not all large firms export. Following a trade liberalization, non-exporters experience a fall in their market-to-book ratio and consolidate the number of products they manage to lower their marginal costs while the opposite holds for exporters.
Keywords: Diversification; Discount; Firm heterogeneity; Multiproduct firms; Productivity; Trade liberalization
JEL Codes: F12; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Managerial efficiency (D22) | Export status (Y10) |
| Trade liberalization (F13) | Non-exporters' product consolidation (F14) |
| Trade liberalization (F13) | Exporters' product expansion (F10) |