Monopolistic Competition, International Trade and Firm Heterogeneity - a Life Cycle Perspective

This paper presents a dynamic international trade model based on monopolistic competition, where observed intra-industry differences at a given point in time reflect different stages of the firm’s life cycle. New product varieties of still higher quality enter the market every period rendering old varieties obsolescent in a process of creative destruction. For given technology (variety) production costs decrease after an infant period due to learning. It is shown that several patterns of exports may arise depending primarily on the size of fixed trade costs. At a given point in time firms therefore differ due to different age, although all firms are symmetric in a life cycle perspective. The paper thus offers an alternative view on firm heterogeneity compared with other recent papers, where productivity differences appear as an outcome of a stochastic process.Product innovations; learning; creative destruction; firm heterogeneity; export performance

Work Hours, Social Value of Leisure and Globalisation

We examine how openness interacts with the coordination of consumption-leisure decisions in determining the equilibrium working hours and wage rate when there are leisure externalities (e.g., due to social interactions). The latter are modelled by allowing a workers marginal utility of leisure to be increasing in the leisure time taken by other workers. Coordination takes the form of internalising the leisure externality and other relevant constraints (e.g., labour demand). The extent of openness is measured by the degree of capital mobility. We find that: coordination lowers equilibrium work hours and raises the wage rate; there is a U-shaped (inverse-U-shaped) relationship between work hours (wages) and the degree of coordination; coordination is welfare improving; and, the gap between the coordinated and uncoordinated work hours (and the corresponding wage rates) is affected by the extent and nature of openness.coordination; corporatism; openness; capital mobility; social multiplier; welfare; work hours

The export intensity of foreign affiliates in transition economies - the importance of the organization of production

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