DP13528 | Trade, Location and Multiproduct Firms

Publication Date

02/14/2019

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Abstract

In this paper we study how trade liberalization affects the location and the product scope of firms. We find that the largest and most productive multiproduct firms concentrate to the larger market as a result of trade liberalization. In the presence of relocation costs, we also find that these firms will expand their product range in the larger market while firms in the smaller market will contract their product scope. These effects are magnified with firm-level productivity. The findings are consistent with Japanese manufacturing firm data.