TY  - JOUR
AU  - Bernard,Andrew B.
AU  - Redding,Stephen J.
AU  - Schott,Peter K.
TI  - Multi-Product Firms and Trade Liberalization
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12782
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12782
L1  - http://www.nber.org/papers/w12782.pdf
N1  - Author contact info:
Andrew B. Bernard
Tuck School of Business at Dartmouth
100 Tuck Hall
Hanover, NH  03755
Tel: 603/646-0302
Fax: 603/646-0995
E-Mail: Andrew.B.Bernard@dartmouth.edu

Stephen J. Redding
Department of Economics
and Woodrow Wilson School
Princeton University
Fisher Hall
Princeton, NJ 08544
Tel: 609/258-4016
Fax: 609/258-6419
E-Mail: reddings@princeton.edu

Peter K. Schott
Yale School of Management
135 Prospect Street
New Haven, CT 06520-8200
Tel: 203/436-4260
Fax: 203/432-6974
E-Mail: peter.schott@yale.edu
AB  - This paper develops a general equilibrium model of multi-product firms and analyzes their behavior during trade liberalization. Firm productivity in a given product is modeled as a combination of firm-level "ability" and firm-product-level "expertise", both of which are stochastic and unknown prior to the firm's payment of a sunk cost of entry. Higher firm-level ability raises a firm's productivity across all products, which induces a positive correlation between a firm's intensive (output per product) and extensive (number of products) margins. Trade liberalization fosters productivity growth within and across firms and in aggregate by inducing firms to shed marginally productive products and forcing the lowest-productivity firms to exit. Though exporters produce a smaller range of products after liberalization, they increase the share of products sold abroad as well as exports per product. All of these adjustments are shown to be relatively more pronounced in countries' comparative advantage industries.
ER  -