On the impact of trade on industrial structures: The role of entry cost heterogeneity
(2009)
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- Authors
- Abstract
- This paper investigates the impacts of progressive trade openness, technological externalities, and heterogeneity of individuals on the formation of entrepreneurship in a two-country occupation choice model. We show that trade opening gives rise to a non-monotonic process of international specialization, in which the share of entrepreneurial firms in the large (small) country first increases (decreases) and then decreases (increases), with the global economy exhibiting first de-industrialization and then re-industrialization. When countries have the same size, we also show that strong technological externalities make the symmetric equilibrium unstable, generating equilibrium multiplicity, while sufficient heterogeneity of individuals leads to the stability and uniqueness of the symmetric equilibrium.
- Affiliations
Hitotsubashi University, Japan & PSE, France Graduate School of Economics Osaka University, Japan Graduate School of Economics University of Tokyo, Japan Faculty of Economics
Citations
Oyama, D., Sato, Y., Tabuchi, T., & Thisse, J.-F. (2009). On the impact of trade on industrial structures: The role of entry cost heterogeneity (CORE Discussion Papers 2009/46). https://hdl.handle.net/2078.5/250749