here's a version of the simple het firm story :
"as lower trade costs allow foreign producers to target the domestic markets, the operating profits of domestic firms in those markets shrink whatever their productivities. On the other hand, some domestic firms gain access to foreign markets and get additional profits from their foreign ventures. These are the firms that are productive enough to cope with the additional costs of foreign activity (such as those due to transportation and remaining administrative duties or institutional and cultural barriers).
The result is the partition of the initially active domestic firms in three groups. As they start making losses in their home markets without gaining access to foreign markets, the least productive firms are forced to exit. The most productive firms, meanwhile, are able to compensate lost profits on home sales with new profits on foreign sales and so can survive and expand their market shares. Finally, firms with intermediate levels of productivity also survive but, not being productive enough to access foreign markets, are relegated to home sales only and their market shares fall. Since international trade integration eliminates the least productive firms, average productivity grows through the reallocation of productive resources from less to more efficient producers."
hmmmm
a model here ?
Melitz and Ottaviano (2008)
claims for model
" richer availability of product varieties;
tougher competition and weaker market power of firms;
better exploitation of economies of scale;
efficiency gains via the selection of the most efficient firms"
heterogenious firms
the evolutionary angle
uneven mark ups
looking at operating profit margins
its a start
but consider mission here
"As protectionist pressures mount worldwide, it is important to continue to shore up the case for open trade policy"
in that context here's a cute "finding":
".... trade partners of the EU would gain from undoing EU integration,
higher prices inside the EU allow a greater number of non-European firms
to serve European markets."
