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Eckel, Carsten; Iacovone, Leonardo; Javorcik, Beata and Neary, J. Peter (September 2016): Testing the Core-competency Model of Multi-product Exporters. In: Review of International Economics, Vol. 24, No. 4: pp. 699-716

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We review the implications of the core-competence model of multi-product firms, including the market-size puzzle: for most countries, the world market is much larger than the home market, while the costs of accessing foreign markets are relatively low;hence the model predicts that most domestic firms should export more of their core products than they sell domestically;yet, in practice, we do not observe this. Extending the model to allow for investment in export market penetration resolves the puzzle and Mexican data confirm its predictions: in particular, only the largest firms exhibit the dominance of exports over home sales.

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