Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197896 
Year of Publication: 
2018
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2018-43
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper develops a theoretical framework to infer the nature of fixed costs from the relationship between entry patterns in international markets and destination market size. If fixed costs are at the firm level, firms take advantage of an intrafirm spillover by expanding firm-level product range (scope). Few firms enter with many products and dominate international trade. If fixed costs are at the product level, an interfirm spillover reduces the fixed costs to export for all firms producing the product. Using cross-country data on firm and product, I find empirical evidence consistent with product-level costs. More firms than products enter in larger markets, offering their consumers lower prices and a greater variety of goods within the product category.
Subjects: 
Firm dynamics
International topics
Trade integration
JEL: 
F12
F14
F23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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