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Ricardian trade and the impact of domestic competition on export performance

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Abstract:

Abstract This paper develops and empirically examines a model of relative productivity differences both within and across industries for small open economies. We decompose the effect of industry productivity on export performance into direct effect of own‐firm productivity and an indirect effect of higher peer‐firm productivity. In a sample of Chilean and Colombian plants, we find evidence of both a positive direct effect and a negative indirect effect. The empirical evidence supports our theoretical prediction that industry‐specific factors of production and asymmetric substitutability between domestic and foreign varieties drive the negative indirect effect. JEL classification: F10, F11, F12

Language: English

Document Type: Research Article

DOI: https://doi.org/10.1111/j.1540-5982.2012.01715.x

Affiliations: 1: Department of Economics, University of British Columbia 2: Federal Reserve Board of Governors 3: Department of Economics, University of Toronto

Publication date: 2012-05-01

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