A1 - Thierry Mayer
A1 - Marc Melitz
A1 - Gianmarco Ottaviano
TI - Product Mix and Firm Productivity Responses to Trade Competition
IS - 2016-17
T3 - Working Papers
KW - Multiproduct Firms
KW - Productivity
KW - Trade
N2 - We document how demand shocks in export markets lead French multi-product exporters to re-allocate the mix of products sold in those destinations. 
In response to positive demand shocks, those French firms skew their export sales towards their best performing products; and also extend the range of products sold to that market. We develop a theoretical model of multi-product firms and derive the specific demand and cost conditions needed to generate these product-mix reallocations. Our theoretical model highlights how the increased competition from demand shocks in export markets-and the induced product mix reallocations-induce productivity changes within the firm. We then empirically test for this connection between the demand shocks and the productivity of multi-product firms exporting to those destinations. We find that the effect of those demand shocks on productivity are substantial-and explain an important share of aggregate productivity fluctuations for French manufacturing.
ER -