Below is the presentation from the ADEMU Lecture “Competitive Effects of Trade: Theory and Measurement” by Marc Melitz (Harvard University) which was held at EUI on September 20th 2016.
Trade induces many different types of reallocations across firms and products. These reallocations include selection effects (which products are sold where; which firms survive, and which ones export) as well as competition effects (responses in markups that generate changes in the relative sales of products in a given destination). These reallocations generate endogenous productivity changes (independent of technology) which in turn contribute to aggregate gains from trade. This lecture first develops a flexible theoretical framework that jointly characterizes these selection and competition effects of trade. The lecture then reviews some new empirical evidence highlighting these competitive effects of trade for French firms; and their consequences for French manufacturing productivity growth.