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From Micro to Macro: Aggregate Implications of Firm-Level Heterogeneity in International Trade

Objective

What determines the patterns of international trade and the associated welfare effects? Can individual
incentives to trade diverge from societal objectives? Should governments intervene to promote or restrict
international transactions? Questions like these have recently gained new salience, in Europe and elsewhere,
due to renewed protectionist pressures and resurgent nationalistic tendencies arising from diffuse
disenchantment with globalization.
The aim of the research project is to highlighting key dimensions along which the answers to these questions
obtained from conventional trade models with homogenous firms should be revisited in the light of
permanent pervasive firm heterogeneity. In particular, the project will pursue four specific objectives through
four integrated work packages providing new insights on how firm heterogeneity affects: (1) the ability of
markets to deliver allocative efficiency; (2) The design of optimal multilateral trade policies; (3) The
comparative advantages of countries; (4) The capabilities of a country as an exporter.
The first work package will investigate whether the allocative inefficiency (“misallocation”) determined by
firm heterogeneity in the presence of pricing distortions is quantitatively relevant for a country’s aggregate
economic performance, and whether economic integration reduces or exacerbates such misallocation. The
second work package will develop the theoretical implications of firm heterogeneity for trade policy, with
special emphasis on the cooperative design of optimal multilateral trade agreements aimed at maximizing the
joint welfare of all trade partners. The third work package will study how country, sector and firm
characteristics interact to determine countries’ responses to trade liberalization. The fourth work package
will investigate the distinct role of firm heterogeneity in determining a country’s ability to export through the
shape of the productivity distribution of its producers.

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Keywords

Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)

Programme(s)

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Topic(s)

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Funding Scheme

Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.

ERC-ADG - Advanced Grant

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Call for proposal

Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.

(opens in new window) ERC-2017-ADG

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Host institution

UNIVERSITA COMMERCIALE LUIGI BOCCONI
Net EU contribution

Net EU financial contribution. The sum of money that the participant receives, deducted by the EU contribution to its linked third party. It considers the distribution of the EU financial contribution between direct beneficiaries of the project and other types of participants, like third-party participants.

€ 1 335 693,75
Address
VIA SARFATTI 25
20136 Milano
Italy

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Region
Nord-Ovest Lombardia Milano
Activity type
Higher or Secondary Education Establishments
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Total cost

The total costs incurred by this organisation to participate in the project, including direct and indirect costs. This amount is a subset of the overall project budget.

€ 1 335 693,75

Beneficiaries (1)

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