Product Mix and Firm Productivity Responses to Trade Competition

By Thierry Mayer, Marc J. Melitz, Gianmarco I. P. Ottaviano. Review of Economics and Statistics, 2020

164 citations recorded by the source corpus.

Abstract We document how demand shocks in export markets lead French multiproduct exporters to reallocate the mix of products sold in those destinations. In response to positive demand shocks, French firms skew their export sales toward their best-performing products. We develop a theoretical model of multiproduct firms and derive the specific demand conditions (with endogenous price elasticities) needed to generate these product-mix reallocations. Under those demand conditions, the increased competition from demand shocks in export markets also induces productivity changes within the firm. We empirically test for this connection between demand shocks and the productivity of multiproduct firms. We find that this connection is economically substantial.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/be86d05713f1c829266e73d907482f210d3b2f8c

Citations in the corpus

• The Impact of Trade Liberalization on Firm Productivity and Innovation (2018, unknown): “Most of them find positive effects—at least at some firms (Verhoogen 2008; Bas and Ledezma 2010; Lileeva and Trefler 2010; Aw, Roberts, and Xu 2011; Bernard, Redding, and Schott 2011; Bustos 2011; Iacovone 2012; Mayer, Melitz, and Ottaviano 2016; Aghion et al.”