Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58947
Authors: 
Pflüger, Michael
Russek, Stephan
Year of Publication: 
2011
Series/Report no.: 
Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6109
Abstract: 
The robust empirical finding that exporting firms are systematically different from firms that merely serve domestic consumers has inspired the development of a new brand of trade theory, the theory of heterogeneous firms and trade. The establishment of a canonical model due to Melitz (2003) has induced a recent wave of research which explores various policy issues and policy instruments. This paper uses a simple tractable two-sector model of monopolistic competition as unifying framework to bring out key lessons of this recent research. We address the gains from trade, country asymmetries involving technology potentials, market sizes, trade openness and various business conditions as well as the international repercussions that emerge when countries non-cooperatively choose entry subsidies and their levels of basic research. We also reinvestigate the process of market exit.
Subjects: 
firm heterogeneity
monopolistic competition
economic policies and welfare
JEL: 
F12
F13
F15
L25
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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