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Global firms

Bernard, Andrew B., Jensen, J. Bradford, Redding, Stephen J. and Schott, Peter K. (2016) Global firms. CEP Discussion Paper (1420). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now standard heterogeneous firm model posits a continuum of firms that compete under monopolistic competition (and hence are measure zero) and decide whether to export to foreign markets. However, much of international trade is dominated by a few “global firms,” which participate in the international economy along multiple margins and are large relative to the markets in which they operate. We outline a framework that allows firms to be of positive measure and to decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. We use this framework to interpret features of U.S. firm and trade transactions data and highlight interdependencies across these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics, and explaining their dominance of aggregate international trade.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2016 The Authors
Divisions: Centre for Economic Performance
Subjects: J Political Science > JZ International relations
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
F - International Economics > F5 - International Relations and International Political Economy > F53 - International Agreements and Observance; International Organizations
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O32 - Management of Technological Innovation and R&D
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 10 May 2016 09:10
Last Modified: 20 Nov 2019 04:55
Funders: Economic and Social Research Council, Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/66437

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