A model of heterogeneous firms with variety-specific fixed costs is developed and analyzed to study how multiproduct firms respond to globalization. In contrast with most existing models, the analysis demonstrates that more-productive firms may expand their product scope, which in turn may push...

A model of heterogeneous firms with multiple products and two production factors (labor and capital) is used to study how trade liberalization affects firms’choices through both product and factor markets. Trade liberalization is shown to always redistribute capital toward more efficient firms...

A model of heterogeneous firms with multiple products and two production factors (labor and capital) is used to study how trade liberalization affects firms' choices through both product and factor markets. Trade liberalization is shown to always redistribute capital toward more efficient firms...

This paper presents a simple model of monopolistic competition that features a general class of additively separable preferences without any fixed costs. While trade always crowds out less productive firms as long as countries are symmetric, we show that the impact is independent of entry/exit a...

When countries are asymmetric, trade with heterogeneous firms can crowd in, rather than crowd out, less productive firms, and less productive firms almost always specialize in export. Whether and how these phenomena will arise depends on a country’s standing in the world. Our study helps...

Innovation plays a key role in economic growth. In this paper, we investigate the effects of intermediate input tariff reduction on the innovation activities of domestic firms. Input tariff reduction has two opposite effects on the innovation decision of a firm: it may promote innovation because...