Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74925
Authors: 
Di Comite, Francesco
Thisse, Jean-François
Vandenbussche, Hylke
Year of Publication: 
2011
Series/Report no.: 
LICOS Discussion Paper 300
Abstract: 
The pattern of trade observed from firm-product-country data calls for a new generation of models. To address the unexplained variation in the data, we propose a new model of monopolistic competition where varieties enter preferences non-symmetrically, capturing both horizontal and vertical differentiation in an unprecedented way. Together with a variable elasticity of substitution, competition effects, varying markups and prices across countries, this results in a tractable model whose predictions differ from existing ones. Using the population of Belgian exporters, our model succeeds in explaining the hitherto unexplained variation. The implications call for a re-thinking of earlier results and measurement practices.
Subjects: 
Heterogeneous firms - Horizontal differentiation - Vertical differentiation - Monopolistic competition - non symmetric varieties
JEL: 
D43
F12
F14
L16
Document Type: 
Working Paper

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