A1 - Flora Bellone
A1 - Patrick Musso
A1 - Lionel Nesta
A1 - Frederic Warzynski
TI - International Trade and Firm-Level Markups when Location and Quality Matter
IS - 2014-15
T3 - Working Papers
KW - Mark-ups
KW - International Trade
KW - Productivity
N2 - In this paper, we estimate firm-level markups and test some micro-level predictions of a model of international trade with heterogeneous firms and endogenous markups. Our theoretical framework is an extended version of the Melitz and Ottaviano (2008) (MO) model that features both quality and spatial differentiation across firms. In line with our model, we find that firm markups are positively related to firm productivity and negatively related to the toughness of local competition. Considering the relationship between firm markups and exports, we find evidence that markups are higher for exporters, what appears to indicate that the quality-enhancing channel overbalances the price-depressing channel of global competition.
ER -