Multi-product firms and flexible manufacturing in the global economy

Eckel, Carsten and Neary, J. P. (2010): Multi-product firms and flexible manufacturing in the global economy. In: Review of Economic Studies, Vol. 77, No. 1: pp. 188-217

Abstract

We present a new model of multi-product firms (MPFs) and flexible manufacturing, and explore its implications in partial and general oligopolistic equilibrium. Globalization affects the scale and scope (or intensive margin and intra-firm extensive margin) of MPFs through a competition effect and a demand effect. The model highlights a new source of gains from trade: productivity increases as firms become \" leaner and meaner\" , concentrating on their core competence; but also a new source of losses from trade: product variety may fall. Our results also hold under free entry, which allows in addition for adjustment along the traditional inter-firm extensive margin.

• Item Type: Journal article
• Faculties: Economics; Economics > Chairs > Seminar for International Trade Theory and Trade Policy
• Subjects: 300 Social sciences > 330 Economics
• Language: English