This paper documents and theoretically explains a nexus between globalization and residual wage inequality through internal labor market reorganization. Combining time-varying within-occupation task information from representative German labor force surveys with linked plant–worker data for Germany, we establish three interrelated facts: (1) Larger plants and exporters organize production into ...

Recent emerging market crises have emphasized the fluctuating character of trade’s reaction after financial crises, in contradiction with the apparently simple theoretical impact of such events on trade, which is essentially described by the well-known J-curve mechanism.. We use a gravity-like equation to assess the impact of these events on bilateral sectoral trade and reveal the elements whic...

We analyze the relationship between international trade and the quality of economic institutions, such as contract enforcement, rule of law, or property rights. The literature on institutions has argued, both empirically and theoretically, that larger firms care less about good institutions and that higher inequality leads to worse institutions. Recent literature on international trade enables ...

Developing countries typically exhibit small firm size, high dispersion of firm-level productivity, and low trade-to-output ratios. They also tend to export particularly less to more distant and smaller markets. To rationalize these facts, this paper develops a flexible, multi-country general equilibrium model of production and trade in which heterogeneous producers face both domestic size-depe...

This paper studies the role of the host country’s market size in the determination of foreign direct investment (FDI) and trade flows in a general equilibrium model. We propose a simple model with non-homothetic consumer behavior where the distribution of income in the host country implies market segmentation. Facing a proximity-concentration trade-off, in equilibrium ex-ante identical firms ch...

This paper examines the effects of trade openness on the optimal incentives firms provide to their managers (and hence firm-level productivity) in the new heterogeneous-firm trade framework. Export market selection and firm heterogeneity are shown to be the key determinants of firm owners’ optimal choices of the incentive contracts, which affect the cost-reduction efforts of their managers. I s...

I incorporate heterogeneous trade costs into the model of Foellmi, Hepenstrick, and Zweimüller (2013) to analyze another reason for export zeros, additional to arbitrage constraints resulting from per capita income differences. In my model, high trade costs may be responsible for export zeros. The level of tariffs and transportation costs are crucial for patterns of international trade. I find ...

Developing countries typically exhibit small firm size, high dispersion of marginal productivity of factors across firms, and low trade-to-output ratios. They also tend to export particularly less to more distant and smaller markets. To rationalize these facts, this paper develops a flexible, multi-country general equilibrium model of production and trade in which heterogeneous producers face b...

We develop a heterogeneous firm intra-industry trade model in which countries are asymmetric in both technology and size. In our model the productivity gaps and levels across countries are jointly determined by technological asymmetry and trade barriers. By assuming symmetry across countries, Melitz (2003)shows that increased exposure to IIT raise aggregate productivity for all countries via re...

What is the impact of terrorism on trade through higher security at the borders? We set up a theory which shows that the impact goes not only from terrorism to trade. Higher trade with a partner might, in return, increase the probability of terrorism acts by making security measures more costly for total welfare. In order to identify the true impact of terrorism, our theory allows then for a st...