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Product Mix and Firm Productivity Responses to Trade Competition

The review of economics and statistics, 2021-12, Vol.103 (5), p.874-891 [Peer Reviewed Journal]

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Title:
Product Mix and Firm Productivity Responses to Trade Competition
Author: Mayer, Thierry ; Melitz, Marc ; Ottaviano, Gianmarco
Subjects: Economics and Finance ; Humanities and Social Sciences
Is Part Of: The review of economics and statistics, 2021-12, Vol.103 (5), p.874-891
Description: We document how demand shocks in export markets lead French multiproduct exporters to reallocate the mix of products sold in those destinations. In response to positive demand shocks, French firms skew their export sales toward their best-performing products. We develop a theoretical model of multiproduct firms and derive the specific demand conditions (with endogenous price elasticities) needed to generate these product-mix reallocations. Under those demand conditions, the increased competition from demand shocks in export markets also induces productivity changes within the firm. We empirically test for this connection between demand shocks and the productivity of multiproduct firms. We find that this connection is economically substantial.
Publisher: Massachusetts Institute of Technology Press (MIT Press)
Language: English
Identifier: ISSN: 0034-6535
EISSN: 1530-9142
DOI: 10.1162/rest_a_00952
Source: HAL SHS: Archive ouverte en Sciences de l'Homme et de la Société (Open Access)

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