Quotation Felbermayr, Gabriel, Jung, Benjamin. 2018. Market size and TFP in the Melitz model. Review of International Economics. 26 (4), 869-891.




Trade theory in the Krugman tradition predicts a positive correlation between market size and countries’ total factor productivity (TFP). However, in the data, there is no such correlation. Models with heterogeneous firms and selection can reconcile theory and empirics, when the degree of external economies of scale is lower than assumed in the standard CES case. Realistically, larger countries have an over-proportionate share of firms. With export selection, these countries have more input varieties available, but they also have a lower average productivity of firms. Which of these effects dominates depends on the degree of external economies of scale.


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Publication's profile

Status of publication Published
Affiliation External
Type of publication Journal article
Journal Review of International Economics
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, VW-C
Language English
Title Market size and TFP in the Melitz model
Volume 26
Number 4
Year 2018
Page from 869
Page to 891
Reviewed? Y
URL https://api.wiley.com/onlinelibrary/tdm/v1/articles/10.1111%2Froie.12346
DOI http://dx.doi.org/10.1111/roie.12346
Open Access N


Felbermayr, Gabriel (Details)
Jung, Benjamin (University of Hohenheim, Germany)
Department of Economics (Felbermayr) (Details)
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