The literature of firm heterogeneity in international trade grows rapidly in recent years. This paper reviews the theoretical development of the topic, and tries to find future directions of this research agenda.
Traditional trade theory and intra-industry trade theory do not sufficiently explain the recent increase of FDI and intra-industry trade between developed and developing countries. As it is not countries but firms that actually engage in trade and FDI, recent theoretical development of trade and FDI emphasizes that firm-level analysis is essential to explaining the recent growth in trade and FDI, and provides a new theoretical perspective of international trade and FDI with firm heterogeneity.This paper is purposed to review new theoretical and empirical challenges to recent international trade and FDI.
This study formulates a dynamic two-country (developed and developing countries) Chamberlin-Heckscher-Ohlin model of trade with endogenous time preferences a la Uzawa (1968). We examine the relationship between initial factor endowment differences and trade patterns in the steady state . In particular, to highlight the integration of developing countries (e.g., China) into the world trading system, we concentrate on the case of asymmetric size of two countries (in terms of population). It will be shown that (i) given that the representative household in each country supplies an equal amount of labor, only intra-industry trade occurs in the steady state irrespective of differences in the number of representative households and that (ii) the number of households being equal, the country with less labor efficiency becomes the net exporter of the capital-intensive good .
We investigate how industrial capital accumulation may affect environment, urban unemployment, gross domestic product (GDP) and welfare in a small open Harris-Todaro model with polluting urban manufacturing. Urban capital accumulation, which increases pollution, reduces the level of urban unemployment and raises GDP if and only if the degree of urbanization is high and rural technology exhibits strong diminishing returns to labor. Immiserizing growth in terms of welfare happens whenever GDP decreases. A developing country that has the two features above is likely to promote industrial capital accumulation even though it deteriorates global environmental quality.
The purpose of this paper is to assess empirically the relative contribution of various domestic and external factors to the Russian financial crisis outburst in 1998. The results of probit estimations suggest that the highest share in the overall crisis probability was associated with external capital flows and the state of international liquidity. The banking sector fragility in spheres of foreign borrowing and domestic lending was another factor mainly responsible for the country's vulnerability to a crisis. The government finance problems and exchange rate misalignments, commonly blamed for the rouble crash, played only a minor role in the crisis eruption.