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Trade, location, and multi-product firms

Author

Listed:
  • Forslid, Rikard
  • Okubo, Toshihiro
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 multi-product 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 scope in the larger market while firms in the smaller market will contract their product scope or expand it to a smaller degree. The adjustment of firms’ product scope can therefore be a substitute for firm relocation, and the cost of introducing new varieties becomes an important parameter, that influences the degree of agglomeration.

Suggested Citation

  • Forslid, Rikard & Okubo, Toshihiro, 2023. "Trade, location, and multi-product firms," Regional Science and Urban Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:regeco:v:100:y:2023:i:c:s0166046223000261
    DOI: 10.1016/j.regsciurbeco.2023.103891
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    More about this item

    Keywords

    Multi-product firms; Heterogeneous firms; Trade liberalization; Firm location;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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