Department of Economics and Business Economics

Spillovers from foreign business conditions

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Spillovers from foreign business conditions. / Sørensen, Allan.

In: Review of World Economics, Vol. 158, No. 3, 08.2022, p. 779-814.

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

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Sørensen, A 2022, 'Spillovers from foreign business conditions', Review of World Economics, vol. 158, no. 3, pp. 779-814. https://doi.org/10.1007/s10290-021-00444-z

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Sørensen, Allan. / Spillovers from foreign business conditions. In: Review of World Economics. 2022 ; Vol. 158, No. 3. pp. 779-814.

Bibtex

@article{23114de0b03741198aef5c7cabe61b20,
title = "Spillovers from foreign business conditions",
abstract = "The present paper explores how foreign business conditions affect domestic income, welfare, and industry structure, i.e., the international spillovers from business conditions, in a two-country one-sector heterogeneous-firms trade model. Pro-competitive improvements in foreign business conditions (e.g., a larger market, higher productivity, lower export costs or lower entry costs) increase real income and thus welfare in both countries. The positive spillovers materialize in part through intra-industry reallocations similar to those released by trade liberalization. They include stronger selection into firm survival and a larger share of firms exporting, and, thus, a shift of activity towards more productive firms and a subsequent increase in aggregate productivity. The change in the share of domestic expenditure is shown to be a sufficient statistic for how changes in foreign business conditions affect domestic real income, welfare, and industry structure. Finally, the paper highlights that the sign of the spillover is highly dependent on whether the general equilibrium is restored through standard home market effects or through adjustment in the relative wage.",
keywords = "Business conditions, Heterogeneous firms, Industry dynamics, International spillovers, Trade",
author = "Allan S{\o}rensen",
note = "Publisher Copyright: {\textcopyright} 2021, The Author(s) under exclusive licence to Kiel Institute for the World Economy.",
year = "2022",
month = aug,
doi = "10.1007/s10290-021-00444-z",
language = "English",
volume = "158",
pages = "779--814",
journal = "Review of World Economics",
issn = "1610-2878",
publisher = "Springer",
number = "3",

}

RIS

TY - JOUR

T1 - Spillovers from foreign business conditions

AU - Sørensen, Allan

N1 - Publisher Copyright: © 2021, The Author(s) under exclusive licence to Kiel Institute for the World Economy.

PY - 2022/8

Y1 - 2022/8

N2 - The present paper explores how foreign business conditions affect domestic income, welfare, and industry structure, i.e., the international spillovers from business conditions, in a two-country one-sector heterogeneous-firms trade model. Pro-competitive improvements in foreign business conditions (e.g., a larger market, higher productivity, lower export costs or lower entry costs) increase real income and thus welfare in both countries. The positive spillovers materialize in part through intra-industry reallocations similar to those released by trade liberalization. They include stronger selection into firm survival and a larger share of firms exporting, and, thus, a shift of activity towards more productive firms and a subsequent increase in aggregate productivity. The change in the share of domestic expenditure is shown to be a sufficient statistic for how changes in foreign business conditions affect domestic real income, welfare, and industry structure. Finally, the paper highlights that the sign of the spillover is highly dependent on whether the general equilibrium is restored through standard home market effects or through adjustment in the relative wage.

AB - The present paper explores how foreign business conditions affect domestic income, welfare, and industry structure, i.e., the international spillovers from business conditions, in a two-country one-sector heterogeneous-firms trade model. Pro-competitive improvements in foreign business conditions (e.g., a larger market, higher productivity, lower export costs or lower entry costs) increase real income and thus welfare in both countries. The positive spillovers materialize in part through intra-industry reallocations similar to those released by trade liberalization. They include stronger selection into firm survival and a larger share of firms exporting, and, thus, a shift of activity towards more productive firms and a subsequent increase in aggregate productivity. The change in the share of domestic expenditure is shown to be a sufficient statistic for how changes in foreign business conditions affect domestic real income, welfare, and industry structure. Finally, the paper highlights that the sign of the spillover is highly dependent on whether the general equilibrium is restored through standard home market effects or through adjustment in the relative wage.

KW - Business conditions

KW - Heterogeneous firms

KW - Industry dynamics

KW - International spillovers

KW - Trade

UR - http://www.scopus.com/inward/record.url?scp=85122138877&partnerID=8YFLogxK

U2 - 10.1007/s10290-021-00444-z

DO - 10.1007/s10290-021-00444-z

M3 - Journal article

AN - SCOPUS:85122138877

VL - 158

SP - 779

EP - 814

JO - Review of World Economics

JF - Review of World Economics

SN - 1610-2878

IS - 3

ER -