Productive Firms (productive + firm)

Distribution by Scientific Domains

Selected Abstracts

The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity

ECONOMETRICA, Issue 6 2003
Marc J. Melitz
This paper develops a dynamic industry model with heterogeneous firms to analyze the intra-industry effects of international trade. The model shows how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market) and will simultaneously force the least productive firms to exit. It then shows how further increases in the industry's exposure to trade lead to additional inter-firm reallocations towards more productive firms. The paper also shows how the aggregate industry productivity growth generated by the reallocations contributes to a welfare gain, thus highlighting a benefit from trade that has not been examined theoretically before. The paper adapts Hopenhayn's (1992a) dynamic industry model to monopolistic competition in a general equilibrium setting. In so doing, the paper provides an extension of Krugman's (1980) trade model that incorporates firm level productivity differences. Firms with different productivity levels coexist in an industry because each firm faces initial uncertainty concerning its productivity before making an irreversible investment to enter the industry. Entry into the export market is also costly, but the firm's decision to export occurs after it gains knowledge of its productivity. [source]

The euro and the competitiveness of European firms

ECONOMIC POLICY, Issue 57 2009
Gianmarco I.P. Ottaviano
SUMMARY EMU and competition Much attention has been paid to the impact of a single currency on actual trade volumes. Lower trade costs, however, matter over and beyond their effects on trade flows: as less productive firms are forced out of business by the tougher competitive conditions of international markets, economic integration fosters lower prices and higher average productivity. We assess the quantitative relevance of these effects calibrating a general equilibrium model using country, sector and firm-level empirical observations. The euro turns out to have increased the overall competitiveness of Eurozone firms, and the effects differ along interesting dimensions: they tend to be stronger for countries which are smaller or with better access to foreign markets, and for firms which specialize in sectors where international competition is fiercer and barriers to entry lower. , Gianmarco I.P. Ottaviano, Daria Taglioni and Filippo di Mauro [source]

Market power, price discrimination, and allocative efficiency in intermediate-goods markets

Roman Inderst
We consider a monopolistic supplier's optimal choice of two-part tariff contracts when downstream firms are asymmetric. We find that the optimal discriminatory contracts amplify differences in downstream firms' competitiveness. Firms that are larger,either because they are more efficient or because they sell a superior product,obtain a lower wholesale price than their rivals. This increases allocative efficiency by favoring the more productive firms. In contrast, we show that a ban on price discrimination reduces allocative efficiency and can lead to higher wholesale prices for,all,firms. As a result, consumer surplus, industry profits, and welfare are lower. [source]

Firm survival, performance, and the exchange rate

Jen Baggs
Abstract This paper examines the impact of exchange rate movements on firm survival and sales. We exploit detailed Canadian firm-level data from 1986 to 1997, a period in which the Canadian dollar appreciated approximately 30% in the first six years and depreciated 30% in the later six years. We find that survival and sales are negatively associated with appreciations in the Canadian dollar. The impact on survival is less pronounced for more productive firms. The magnitude of the impact of exchange rate changes on firm survival and sales was comparable to the effect of CUSFTA-mandated tariff changes. Ce texte étudie l'impact des mouvements dans le taux de change sur les ventes et la survie des entreprises. On exploite une base de données détaillées au niveau de l'entreprise pour la période 1986,1997 , une période durant laquelle le dollar s'est apprécié d'à peu près 30% au cours des premiers six ans, et s'est déprécié de 30% au cours des six dernières années. Il appert que survie et ventes sont négativement co-reliées quand le dollar s'apprécie. L'impact sur la survie est moins prononcé pour les entreprises plus productives. La magnitude de l'impact des mouvements dans le taux de change sur la survie et les ventes des entreprises a été comparable à l'effet des changements de tarifs commandés par l'Accord de libre-échange Canada-US. [source]