Who Dies? International Trade, Market Structure, and Industrial Restructuring

This paper examines the role of changing factor endowments in the growth and decline of industries and regions. The implications of an endowment-based Heckscher-Ohlin trade model for plant entry and exit are tested on 20 years of data for the entire US manufacturing sector. The trade model provides predictions for which industries will see growth through the positive net entry of plants. A multi-region version of the same model has predictions for which regions will see high turnover and net entry of plants. In a country such as the U.S. that is augmenting both its physical and human capital, the least capital-intensive, least skill-intensive industries are correctly predicted to have the lowest rate of net entry. In addition, increases in regional capital and skill intensity are associated with higher probabilities of shutdown, especially for plants in industries with low initial capital and skill intensities.

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