A simple model of firm heterogeneity, international trade, and wages

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This paper presents a general equilibrium trade model in which homogeneous firms choose a technology from a set of competing technologies and choose employees from a set of workers of heterogeneous skill. In equilibrium, the interaction between the characteristics of competing technologies, international trade costs, and the availability of workers of heterogeneous skill gives rise to firm heterogeneity. The model generates several of the stylized facts concerning the (apparent) superiority of firms that engage in international trade relative to those that do not and has implications for the effect of international trade on the skill premium and on observed industry-level productivity.

Original languageEnglish (US)
Pages (from-to)1-20
Number of pages20
JournalJournal of International Economics
Issue number1
StatePublished - Jan 2005

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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