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Product Differentiation and Trade

Authors
  • Pi, Jiancai
  • Fan, Yanwei
Type
Published Article
Journal
The B.E. Journal of Theoretical Economics
Publisher
De Gruyter
Publication Date
Dec 15, 2023
Volume
24
Issue
1
Pages
235–261
Identifiers
DOI: 10.1515/bejte-2023-0016
Source
De Gruyter
Keywords
Disciplines
  • Research Article
License
Yellow

Abstract

This paper analyzes the impacts of product differentiation in general oligopolistic equilibrium with trade. With constant wages, when product differentiation increases, the extensive margins of home and foreign exports decrease, and the domestic and foreign scopes of variety in each industry increase unambiguously. However, the impact of product differentiation on the labor requirement of each firm is mixed. In general equilibrium, an increment of product differentiation increases the wage rate unambiguously if the total variety of goods is large enough in all industry. However, if all firms are single-product ones, an increment of product differentiation increases the wage rate unambiguously in general equilibrium.

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