On Tuesday 20 September, the ADEMU Project held a lecture on “Competitive Effects of Trade: Theory and Measurement”, given by Professor Marc Melitz from Harvard University.

This event was organised by the Economics Department at the European University Institute, where the event was also held.

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 developed a flexible theoretical framework that jointly characterizes these selection and competition effects of trade.  The lecture then reviewed some new empirical evidence highlighting these competitive effects of trade for French firms; and their consequences for French manufacturing productivity growth.