Intra-Industry Trade with Firm Heterogeneity. The Melitz Model and its Recent Extensions


Master's Thesis, 2015

91 Pages, Grade: 2,0


Abstract or Introduction

While the traditional Trade Theory is merely able to explain trade between developed and less developed countries, the more recent literature of the New Trade Theory allows for capturing trade between countries that are all highly developed. One of its models - the Melitz model of intra-industry trade (2003)
- incorporates heterogeneity in firm productivity into a framework based on Krugman (1980). The Melitz model is a corner stone of New Trade Theory models and has been extended in various papers to analyze intra-industry trade with respect to different aspects. One important aspect that is covered intensively in recent literature is the efect of unilateral trade liberalization on a country's welfare.
This thesis presents the Melitz model (2003) by firstly illustrating its fundament based onKrugman (1980) and secondly deriving its working mechanisms both for opening for trade as well as for trade liberalization. Further, extensions by Melitz and Ottaviano (2005) and Demidova and Rodriguez-Clarez (2011) will be presented. The thesis concludes by discussing the contribution of the Melitz model to explain occurring trading patterns and its limitations.

Details

Title
Intra-Industry Trade with Firm Heterogeneity. The Melitz Model and its Recent Extensions
College
University of Münster  (Institute of International Economics)
Grade
2,0
Author
Year
2015
Pages
91
Catalog Number
V335618
ISBN (eBook)
9783668257764
ISBN (Book)
9783668257771
File size
932 KB
Language
English
Tags
intra-industry, trade, firm, heterogeneity, melitz, model, recent, extensions
Quote paper
Michael Betz (Author), 2015, Intra-Industry Trade with Firm Heterogeneity. The Melitz Model and its Recent Extensions, Munich, GRIN Verlag, https://www.grin.com/document/335618

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