skip to content

Faculty of Economics

Journal Cover

Impullitti, G. and Licandro, O.

Trade, firm selection and innovation: the competition channel

The Economic Journal

(2017)

Abstract: 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.

Author links:

Publisher's Link: http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12466/full



Papers and Publications



Recent Publications


Carvalho, V. M., Nirei, M., Saito, Y. U. and Tahbaz-Salehi, A. Supply Chain Disruptions: Evidence from the Great East Japan Earthquake Quarterly Journal of Economics, forthcoming [2021]

Elliott, M. and Golub, B. A Network Approach to Public Goods Journal of Political Economy [2019]

Agranov, M. and Elliott, M. Commitment and (in) Efficiency: A Bargaining Experiment Journal of the European Economic Association [2020]

Giannitsarou, C., Kissler, S. and Toxvaerd, F. Waning Immunity and the Second Wave: Some Projections for SARS-CoV-2 American Economic Review: Insights, forthcoming [2021]