International Trade and Industrial Dynamics

29 Pages Posted: 9 Jul 2009

See all articles by Josh Ederington

Josh Ederington

University of Kentucky - Department of Economics

Phillip McCalman

University of California, Santa Cruz - Department of Economics

Abstract

In this article, industrial evolution is driven by endogenous technology choices of firms, generating a rich environment that includes the possibility of a dramatic shakeout. The likelihood, magnitude, and timing of this shakeout are characterized and depend not only on the size of an innovation but also on cost structure. In this setting, trade liberalization reduces the likelihood of a shakeout, resulting in more stable industrial structures. However, when shakeouts arise in global markets, the distribution of exits can vary widely across countries. Furthermore, conditions exist where a shakeout occurs in a closed economy but not in an open economy.

Suggested Citation

Ederington, Josh and McCalman, Phillip, International Trade and Industrial Dynamics. International Economic Review, Vol. 50, Issue 3, pp. 961-989, August 2009, Available at SSRN: https://ssrn.com/abstract=1432249 or http://dx.doi.org/10.1111/j.1468-2354.2009.00555.x

Josh Ederington (Contact Author)

University of Kentucky - Department of Economics ( email )

335 Business and Economics Building
Lexington, KY 40506
United States

Phillip McCalman

University of California, Santa Cruz - Department of Economics ( email )

Santa Cruz, CA 95064
United States
(831) 459-4381 (Phone)
(831) 459-5900 (Fax)

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