The impact of trade on aggregate productivity and welfare with heterogeneous firms and business cycle uncertainty
By: Jang Ping Thia.
Contributors: London School of Economics and Political Science. Centre for Economic Performance.
Series: CEP discussion paper -- no. 883
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2008
Place of publication: London
Language: eng
Format: Electronic resource
Description: This paper presents a model with monopolistic competition, productively heterogeneous firms, and business cycle aggregate shocks. With firm-specific productive heterogeneity, weaker firms quit when faced with a negative aggregate shock. Consequently, trade does not always increase firm-level aggregate productivity as negative shocks on the home market can be compensated for by positive shocks elsewhere. Weaker firms, which would otherwise quit in autarky, can continue to operate by exporting. Despite this, trade can still improve welfare for risk-averse consumers by reducing aggregate price fluctuations.
Notes: Title from PDF file (viewed on Oct. 10, 2008).

"July 2008."

Includes bibliographical references.

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