Premium
Asymmetric Monotone Comparative Statics for the Industry Compositions
Author(s) -
Rosenstand Laugesen Anders
Publication year - 2017
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12269
Subject(s) - comparative statics , dominance (genetics) , stochastic dominance , economics , order (exchange) , intra industry trade , monotone polygon , competition (biology) , shock (circulatory) , microeconomics , international trade , econometrics , trade barrier , mathematics , ecology , medicine , biochemistry , chemistry , geometry , finance , biology , gene
Abstract Within a standard model of international trade with heterogenous firms and two asymmetric countries, we derive sufficient conditions for monotone comparative statics (MCS) for the industry composition. This model outcome is defined as first‐order stochastic dominance shifts in the equilibrium distributions of all activities across active firms. MCS for the industry composition occurs in a country that experiences a decline in its costs of serving the foreign market and meanwhile experiences an increase in its level of competition. In the other country, the industry‐level implications are exactly opposite. These clear industry‐level results hold while firms respond asymmetrically to the trade shock.