Working Paper: NBER ID: w16959
Authors: Thierry Mayer; Marc J. Melitz; Gianmarco I.P. Ottaviano
Abstract: We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.
Keywords: No keywords provided
JEL Codes: F12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tougher competition in export markets (F14) | Firms skew their export sales towards their best performing products (F14) |
| Firms skew their export sales towards their best performing products (F14) | Differences in measured firm productivity (D20) |
| Tougher competition induces firms to drop their worst performing products (L11) | Enhanced productivity (O49) |
| Tougher competition (L19) | Changes in product mix (L19) |
| Changes in product mix (L19) | Increased output and sales per worker (E23) |