Trade, firm selection and innovation: the competition channel
We study the welfare gains from trade in an economy with heterogeneous firms, variable markups and endogenous growth. Variable markups arise from oligopolistic competition, and cost-reducing innovation is the engine of long-run growth. Trade liberalisation stiffens competition by reducing markups, g...
| Main Authors: | , |
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| Format: | Article |
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Wiley
2018
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| Online Access: | https://eprints.nottingham.ac.uk/46994/ |
| _version_ | 1848797444651876352 |
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| author | Impullitti, Giammario Licandro, Omar |
| author_facet | Impullitti, Giammario Licandro, Omar |
| author_sort | Impullitti, Giammario |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | We study the welfare gains from trade in an economy with heterogeneous firms, variable markups and endogenous growth. Variable markups arise from oligopolistic competition, and cost-reducing innovation is the engine of long-run growth. Trade liberalisation stiffens competition by reducing markups, generating tougher firm selection and increasing the aggregate productivity level. Selection increases firms’ incentives to innovate, thereby leading to a higher aggregate productivity growth rate. Endogenous productivity growth boosts the selection gains from trade, leading to substantial welfare improvements. A calibrated version of the model shows that growth doubles the welfare gains obtainable in models with static firm-level productivity. |
| first_indexed | 2025-11-14T20:03:59Z |
| format | Article |
| id | nottingham-46994 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T20:03:59Z |
| publishDate | 2018 |
| publisher | Wiley |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-469942020-05-04T19:52:31Z https://eprints.nottingham.ac.uk/46994/ Trade, firm selection and innovation: the competition channel Impullitti, Giammario Licandro, Omar We study the welfare gains from trade in an economy with heterogeneous firms, variable markups and endogenous growth. Variable markups arise from oligopolistic competition, and cost-reducing innovation is the engine of long-run growth. Trade liberalisation stiffens competition by reducing markups, generating tougher firm selection and increasing the aggregate productivity level. Selection increases firms’ incentives to innovate, thereby leading to a higher aggregate productivity growth rate. Endogenous productivity growth boosts the selection gains from trade, leading to substantial welfare improvements. A calibrated version of the model shows that growth doubles the welfare gains obtainable in models with static firm-level productivity. Wiley 2018-02 Article PeerReviewed Impullitti, Giammario and Licandro, Omar (2018) Trade, firm selection and innovation: the competition channel. Economic Journal, 128 (608). pp. 189-229. ISSN 1468-0297 Endogenous Growth Heterogeneous Firms Oligopoly Variable Markups Dynamic Gains from Trade http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12466/abstract doi:10.1111/ecoj.12466 doi:10.1111/ecoj.12466 |
| spellingShingle | Endogenous Growth Heterogeneous Firms Oligopoly Variable Markups Dynamic Gains from Trade Impullitti, Giammario Licandro, Omar Trade, firm selection and innovation: the competition channel |
| title | Trade, firm selection and innovation: the competition channel |
| title_full | Trade, firm selection and innovation: the competition channel |
| title_fullStr | Trade, firm selection and innovation: the competition channel |
| title_full_unstemmed | Trade, firm selection and innovation: the competition channel |
| title_short | Trade, firm selection and innovation: the competition channel |
| title_sort | trade, firm selection and innovation: the competition channel |
| topic | Endogenous Growth Heterogeneous Firms Oligopoly Variable Markups Dynamic Gains from Trade |
| url | https://eprints.nottingham.ac.uk/46994/ https://eprints.nottingham.ac.uk/46994/ https://eprints.nottingham.ac.uk/46994/ |