Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/71314 
Year of Publication: 
2009
Series/Report no.: 
UCD Centre for Economic Research Working Paper Series No. WP09/20
Publisher: 
University College Dublin, UCD School of Economics, Dublin
Abstract: 
There has been great focus in the recent trade theory literature on the introduction of firm heterogeneity into trade models. However, these models tend to rely heavily on symmetry assumptions and assume melting iceberg transport costs as the only form of trade restrictions. Moreover, a standard assumption is that firms differ across marginal cost, yet empirical evidence suggests this is not the only important source of heterogeneity. I provide a highly tractable model, in which firms differ across fixed costs, that qualitatively maintains the main results of these models, but allows for asymmetric changes in trade restrictions, a necessary step towards studying strategic trade policy. In addition, I highlight the differences in the effects on product variety associated with changes in an ad valorem tariff, iceberg transport costs, and additional beachhead costs to become an exporter. This is important as there are potential offsetting effects on firm entry.
Subjects: 
Intra-industry trade
Trade policy
Firm heterogeneity
Monopolistic competition
JEL: 
F10
F13
F15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
192.18 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.