Aarhus University Seal / Aarhus Universitets segl

Fixed export cost heterogeneity, trade and welfare

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This paper presents a new and simple heterogeneous-firms specification. We develop a symmetric two-country intra-industry trade model where firms are of two different marginal costs types and where fixed export costs are heterogeneous across firms. This model traces many of the stylized facts of international trade. However, we find that with heterogeneous fixed export costs there
exists a positive bilateral tariff that maximizes national and world welfare.
Original languageEnglish
JournalEuropean Economic Review
Pages (from-to)1256-1274
Number of pages18
Publication statusPublished - 2008

    Research areas

  • Intra-industry trade, Liberalization, Monopolistic competition, Heterogeneous firms, Protectionism

See relations at Aarhus University Citationformats

ID: 34842