Market Size, Competition, and the Product Mix of Exporters

Thierry Mayer (1) , Marc Melitz (2) , Gianmarco Ottaviano (3)

1 ECON - Département d'économie (Sciences Po)
2 Department of Economics, Harvard University
3 UNIBO - Alma Mater Studiorum Università di Bologna = University of Bologna

We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales toward its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within-firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.

Domaines: Economies et finances

Thierry Mayer, Marc Melitz, Gianmarco Ottaviano. Market Size, Competition, and the Product Mix of Exporters. American Economic Review, 2014, 104 (2), pp.495-536. ⟨10.1257/aer.104.2.495⟩. ⟨hal-03460548⟩