We study the consequences of heterogeneity in factor intensity on firm performance. We present a standard Heckscher–Ohlin model augmented with factor intensity differences across firms within a country–industry pair. We show that for any two firms, each of whose capital intensity is, for...

Most of the theoretical and empirical studies on the Home Market Effect (HME) assume the existence of an "outside good" that absorbs all trade imbalances and equalizes wages. We study the consequences on the HME of removing this assumption. The HME is attenuated and, more interestingly, it...